(Bloomberg) -- The UK’s water watchdog will allow companies to invest as much as £7 billion ($9.1 billion) more in the next five years to curb sewage spills and improve drinking water quality, a move that will require further raising bills for consumers.
While water and sewage firms have faced mounting public anger for their plans to increase prices, Britain’s regulator Ofwat is set to approve most of the extra funding requested since August, according to people familiar with the matter.
UK water companies have come under pressure after failing for years to tackle chronic leaks and pollution. To address those issues, they initially planned to raise rates by an average of 33% by 2030 in order to fund a £100 billion investment program to improve performance and bolster networks against climate change and population growth.
Ofwat has sought to protect consumers from the knock-on impact of rising investments, but companies submitted fresh proposals in August to invest an additional £7 billion during the next five-year price review period.
The extra funding is expected to be approved because it reflects new statutory rules from the Environment Agency on tackling sewage spills and the Drinking Water Inspectorate, the people said, asking not to be identified as the decision is not yet public.
The regulator is also considering boosting returns for investors, after a crisis at Thames Water Utilities Ltd. pushed up the cost of borrowing across the industry. That means customers will see their average annual bills rise by more than the £19 cap Ofwat proposed in July as part of ongoing negotiations with the industry.
Water companies say they now need to raise bills by an average of 40% by 2030, though some will need even larger increases. Southern Water is seeking to lift bills by 84%, while Thames Water wants to see customers pay at least 53% more by the end of the decade.
The higher rates are expected to be confirmed in December, coming into effect in April.
“This increased expenditure request will, if approved, increase customer bills compared to our draft determinations,” Ofwat said in a separate statement published on its website on Tuesday.
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