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Householders with large gardens or swimming pools in England and Wales should be charged more for using water, the utility industry will say in its submission to a review into reform of the sector.
Water UK, which represents the 16 water and sewage companies in England and Wales, told the Financial Times that it would call for water metering to be made compulsory and a reform of charging methods.
At present water meters are compulsory only in areas that are designated “water-stressed”, such as Cambridgeshire, by the Environment Agency, a regulator.
Whether or not they are on meters, all customers pay a fixed standing charge, which Water UK wants abolished. Metered customers are then charged based on water use, while non-metered customers’ charges are calculated according to their property’s “rateable value”, or approximate annual rental value.
Established decades ago, the system means bills are not set entirely according to water use.
However, Water UK will tell the government-commissioned review of the sector being led by Sir John Cunliffe, former deputy chair of the Bank of England, that legislation should be introduced to allow water companies to introduce “block tariffs”, by which the unit price of water would be higher at raised consumption levels.
This would mean some households paying more, such as those with swimming pools or big gardens, and others less, the industry body said.
The recommendation is one of a series of sweeping reforms to be proposed by water companies in a 180-page document submitted to the review, which the government commissioned last year amid public outcry over sewage pollution.
England’s privatised water companies are under fire for paying out £83bn in dividends and incurring £74bn in debt in the 34 years since they were sold off by the government, while failing to invest adequately in infrastructure, leading to pollution and other service failures.
Water services in Scotland and Northern Ireland remain state-owned and are not included in the Cunliffe report.
Cunliffe’s Independent Water Commission has already published some of its initial research findings, but the deadline for submissions closes on Wednesday, ahead of final conclusions being released in June.
David Henderson, chief executive of Water UK, said water companies acknowledged that the “entire regulatory model isn’t delivering for customers or the industry” and that many features were “blunt and crude”.
He added that ministers should set up a consumer ombudsman to protect customers, with powers to enforce judgments once a company’s complaints process had been exhausted, as is the case in the energy, communications and rail sectors.
Although the industry will not call for regulators to be abolished, it will say that roles between the three watchdogs — financial regulator Ofwat, the Environment Agency and the Drinking Water Inspectorate — should be better demarcated.
Performance monitoring should be simpler, Water UK will say, with expert supervisors installed inside the regulators who can keep a closer watch on companies and how they meet consumers’ needs.
Powers should also be devolved away from Whitehall and handed to communities, bringing water companies together with other land users such as farmers to deliver local improvements.
Ofwat in the submission comes in for particular criticism for its complicated models, including its use of a “notional” company — a model, fictional water company that serves as a basis for performance comparisons on metrics such as pollution and efficiency.
Henderson said there were “layers and layers of complexity, such that only a handful of people in the companies or even Ofwat understand them”.
“It should be possible for anyone who can read and write to understand the system,” he said.
Companies are required to submit business plans to Ofwat every five years, which cost about £250mn and take over 15 months, according to Water UK. After that companies were still often told to rewrite their plans, Henderson said.
Ofwat said it was “already working with the industry, investors, consumer and environmental groups to drive changes to deliver a sustainable water sector”.
The Department for Environment, Food and Rural Affairs said it was “committed to taking decisive action to fix the water industry” and would “carefully consider the commission’s conclusions”.
The Environment Agency did not immediately respond to a request for comment.
