WIREDGOV

An independent group of experts appointed by the CMA has decided how much revenue 5 water companies are allowed following their rejection of Ofwat’s decision.

• Group has allowed an expected average increase of 2.2% in customer bills, nearly half of which is due to market movements 
• Some extra money also granted to improve services, tackle pollution and secure investment 
• 83% of increases sought by water companies rejected – companies have been allowed less additional revenue than in the group’s provisional ruling 

Background

A price control sets the amount of revenue companies are allowed to recover through customer bills. In December 2024, Ofwat published the price control for each of the 16 regulated monopoly companies covering the period 2025 to 2030 – a decision it said would lead to average bill increases of £157 (36%) over the 5-year period. 

Five companies – Anglian Water, Northumbrian Water, South East Water, Southern Water, and Wessex Water – argued that Ofwat’s decision left them unable to meet the regulatory requirements set out for them. Each of these companies chose to exercise its legal right to request a “redetermination” of Ofwat’s decision by an independent group of experts appointed by the Competition and Markets Authority (CMA). The disputing companies serve approximately 14 million people and have a combined annual revenue of around £5 billion. 

This process has taken place during a period of extensive debate and proposals for fundamental change for the water sector and how it is regulated. The Independent Water Commission concluded that the sector “requires fundamental reform on all sides”. The UK government response stated that the current system is “failing the environment, customers and investors” and that it “will now act quickly, turning the page on a broken system with root and branch reform”. 

However, the group was required by law to undertake the redeterminations under the current regulatory system, with more fundamental decisions about the water sector necessarily reserved for government. A maximum of 12 months was allowed for this complex process, compared to the 4 years in which Ofwat conducts its price control.

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