How our charges are set

Discover how we set out our charges and learn about the different factors that influence how much you pay for our services.

Every five years the water industry regulator, Ofwat, runs a process (known as a price review) to determine the amount that can be collected from customers through bills.

The amount we can collect from customers was last agreed with Ofwat in 2019, which applies to the period 2020-21 to 2024-25. We are currently going through the process to determine bills for the next five-year period starting from April 2025.

Ofwat’s final decision on this is due in December 2024 or early 2025.

For each five-year period, we prepare a business plan which sets out our proposed commitments, investments and how much this will cost.

Our customers play a very important part in creating our business plan. We consult with customers at length and take their views into account. Ofwat reviews our business plan to inform the appropriate amount we can collect from customers over the five-year period.

Ofwat then sets a price formula that enables us to put the plan into practice while limiting increases in our charges each year. This formula uses the November rate for inflation to set prices for the following year. The water industry uses the Consumer Price Index including Housing Costs (CPIH) as the measure for inflation.

This process caps the overall amount we can collect from customers. Within the cap agreed with Ofwat we may need to change individual charges by different amounts. We do this so that charges to customers are fair in reflecting the cost of the services provided. This means that the increase in unmetered charges can be less or more than that for metered services.

Additionally, your bill will change by more or less, depending on the service you receive from us (eg, water, wastewater or both), how much water you use if your property is metered or the rateable value of your property if it is unmetered.

Since 2015 Ofwat has said that if we receive more from customers’ bills than we had expected, for example, if a dry summer prompts customers in metered properties to use more water in their gardens, the following year we must return that extra amount to customers through slightly lower bills than we had planned.

Finally, where we fail to meet our commitments to the services we offer, we return money to customers through lower bills. Similarly, where we’ve exceeded these commitments, we are rewarded.

Charges applicable from 1 April every year are published by 1 February.

2024-25 Charges

Our charges increased as of 1 April 2024. This is because inflation remains high (although not as high as last year). We are also collecting the reward for our industry-leading performance in 2021-22 performance, which we deferred for a year to help customers during the immediate cost-of-living crisis. This means that bills went up by less than would otherwise have been the case in 2023-24.

Overall, this means that, compared to 2023-24, a typical combined water and sewerage bill for a two-person household with a water meter increased by around £5 per month. A typical household bill for those not on a meter increased by around £8 per month.

2025-2026 Charges

We are awaiting Ofwat’s final decision on how much we can collect from customers through charges for 2025-30. This means that we don’t yet know exactly how much bills will change from April 2025.

In July this year, Ofwat published a draft decision as to what water companies can collect through bills. Based on this, and our forecast of inflation, a two-person household with a water meter would see an increase of around £4 a month, or around £5 a month for those not on a meter.

These figures apply to customers who receive both water and sewerage services from us. They may vary slightly for customers who receive one service from us and another service from a different water company.

However, we are concerned that Ofwat’s draft decision does not allow sufficient funding to deliver the step change in services that is needed from 2025 onwards. We believe our full investment programme is necessary to meet all obligations set by regulators, as well as delivering wider improvements that customers expect. We have expressed this to Ofwat and, if our full plans are approved, this would result in a larger increase in bills for 2025-26. But taking inflation into account, bills will still be lower by 2030 than in 2010.

We expect to confirm next year’s bills at the start of February 2025, once Ofwat issues its final decisions for 2025-2030.