Water Companies Hold Out Against Ofwats Pricing Settlement as Deadline Looms

The majority of British water companies are yet to accept Ofwat’s pricing and spending settlements, with just over a week remaining before the deadline to challenge the regulator at the Competition and Markets Authority (CMA). The regulatory body issued its final determination before Christmas, outlining what the ten regional monopolies and several local suppliers can charge households from spring through to 2030.

Industry analysts initially predicted that up to half of the 16 companies might refer the regulator to the competition authority, potentially triggering sector-wide turmoil. The water companies’ original demands included an average bill increase of 44 per cent over five years, predominantly front-loaded. Ofwat’s initial response suggested increases closer to half that figure, but subsequent negotiations led to a revised average increase of 36 per cent nationwide.

Only three publicly quoted water companies have accepted the terms thus far: Severn Trent and its associate Hafren Dyfrdwy, South West Water with Sutton and East Surrey, and United Utilities in the northwest, alongside Dwr Cymru Welsh Water. Notable holdouts include the financially troubled Thames Water and Southern Water, as well as Northumbrian, Yorkshire, Anglian and Wessex.

Thames Water, currently navigating a contested £3 billion creditor bailout to avoid administration, has been granted a 35 per cent increase by Ofwat, significantly below their initial 53 per cent request. A High Court judge recently criticised both Ofwat and the government for their absence in emergency loan proceedings for the utility.

The 18 February deadline looms large for companies to decide their position. Any referral to the CMA would necessitate a complete restart of the price-settlement process, potentially extending several months or even beyond a year if multiple companies contest the determination. The previous funding settlement five years ago saw four water suppliers challenging Ofwat at the CMA.