New data released by Ofwat shows that the total debt for household water bills across England and Wales for households amounts to over £2 billion. As of March 2024, approximately 8.2% of household customers were in payment arrears, with the average amount owed to their water company being approximately £822.

The regulators most recent research shows that households across England and Wales continue to face significant cost of living challenges.- approximately half of water bill payers have struggled with household bills over the past 12 months, with one in five water bill payers finding it difficult to pay their water bill. In addition, two-thirds of bill payers remain unaware of the financial support available from their water company.

Debt and arrears in the water sector

While water companies are not legally entitled to disconnect household customers, companies can still pursue debt recovery like other creditors - unlike energy, there are no pre-payment water meters available for customers.

The analysis shows about a third of customers in arrears are enrolled in a repayment plan and these customers had lower average arrears levels. There are also approximately 1.1 million household customers who no longer receive services from their previous water company but still have outstanding debt.

In January 2024 the average annual water bill for April 2024 to March 2025 was forecast to be £473. Ofwat points out that in real terms, the average bill is lower than it was in 2019-2020. Despite this, analysis indicates that a sizeable proportion of households are in arrears with their water company and that just under 1 million current household customers have not paid a water bill in over 12 months.

In February 2024 The regulator introduced a new customer focused licence condition which includes new obligations for water companies to provide support for customers who are finding it difficult to pay their bills, as well as those already in debt.

Increasing affordability challenges

With bills set to rise in April, affordability pressures are likely to increase for some customers, making it harder to manage payments.

Ofwat comments:

“That is why it is vital that companies are stepping up their support for customers who struggle to pay.

“Therefore, it is in the interest of all customers that the water sector reduces levels of debt and arrears by recovering as much revenue owed as efficiently and effectively as possible.

“There is a need for water companies to balance recovering revenue with ensuring that water companies deal sensitively with customers who struggle to pay their bill.”

The aim of Ofwat’s analysis is to help the sector better manage customer debt, specifically by:

• Enabling individual companies to investigate why they are outliers on key debt metrics and whether and how they can improve.
• Informing regulatory monitoring of companies' compliance with their licence and Paying fair guidelines
• Providing a baseline to monitor companies' management of customer debt in the context of sector-level bill rises in April 2025.

Ofwat said its analysis of the Annual Performance Report (APR) data submitted by water companie provides a baseline to monitor companies' management of customer debt in the context of significant sector-level bill increases in April 2025.

Next steps

The regulator will continue to monitor customer debt through company annual performance reporting, commenting:

“While there are lots of instances of good practice, problems persist and may worsen as bills rise. Billing remains a primary source of customer complaints, and it is important for companies to ensure that any errors in billing are not contributing to customer debt problems.”

Ofwat intends to meet with water companies in the coming months to review their approaches to debt management, along with further scrutinising performance in debt management and recovery. It will also continue engaging with customer representatives, including CCW, Citizens Advice, the Money and Mental Health Policy Institute and Step Change.

The regulator comments:

“It is important for companies to continue harnessing the benefits of innovation, learning, and collaboration with other sectors. With customers facing debt, rising bills and negative budgets, companies should enhance their efforts to understand and serve customers better and innovate approaches to improve customer debt journeys.”

Ofwat is now seeking comment on the analysis and will publish a summary of the responses received.

Deadline to submit responses to customer This e-mail address is being protected from spambots. You need JavaScript enabled to view it is 28 February 2025.

Click here to download Ofwat’s Analysis of household customer debt