Water bills could be set to rise for those living in the Thames Valley and London if the regulator allows it.
Thames Water customers could see their bills rise by 12%, or £29 per household, during 2014-15 if the regulator allows it.
The water company says it needs more money to meet rising costs for the Super Sewer and to pay off an increasing number of bad debts.
But Ofwat, which will make its decision on whether to allow the price rise in November 2013, has said the rise is unreasonable.
Rising water prices
Thames Water already has an allowance to push up prices by 1.4% plus inflation during 2014 to 2015. It’s now asking for an extra hike of 8% above the rate of inflation, which is currently at 2.8%.
But it can't automatically push up prices further because it’s locked into a fixed-price agreement which lasts until 2015.
Under the agreement, it can ask to increase bills if it has to pay for unexpected costs. Therefore if Ofwat thinks the rise can be justified it could be implemented next April.
Thames Water argues that the rise would be fair because its average bills currently stand at £345 per year, which makes it the second lowest provider in the country.
Consumer groups have reacted angrily to the proposed rise. Sir Tony Redmond, London and South East Chair of the Consumer Council for Water, says many other water companies have absorbed the same costs that Thames Water is facing, without applying for further price increases.
Regina Finn, Ofwat Chief Executive, said the proposed price rise will put more pressure on people who are struggling to pay their bills. “We will challenge these proposals and question the company strongly on their reasons. Proposed increases will only be allowed if they are fully justified," she said.
Thames Tideway Tunnel
One of the main reasons Thames Water is asking for the price increase is to fund the construction of the Thames Tideway Tunnel.
This 25km-long Super Sewer is being built because the current London sewerage system is not able to cope with the growing population of the city.
The land was bought for £273 million, but construction costs are now overrunning into the billions and the company says the only way to fairly raise this money is by putting costs up for everyone.
It also says the rise is due to the prolonged economic downturn, which has resulted in an increasing number of customers failing to pay their bills, along with rising Environment Agency charges.
Thames Water customers
If the price hike goes ahead all 14 million Thames Water customers across London and the Thames Valley will see an increase to their bills from April 2014.
[SPOTLIGHT]The company wants to spread this increase over five years, so the average bill would go up by £6 annually.
Unfortunately unlike other utilities, it’s not possible to choose your water supplier. There are 25 providers across the UK covering water and sewerage services and every five years prices are set, in agreement with Ofwat.
Prices vary quite a bit across the country and our article What does the average water bill cost? gives examples of just how much bills can change.
How to cut your water costs
One way you can reduce costs is through installing a water meter. This charges for the amount of water used, rather than an average amount based on your property, so can work out cheaper.
These can be installed for free; the general rule of thumb is if there are fewer people living in a property than there are rooms, a meter will cut costs. To work out exactly how much you could save the Consumer Council for Water has a calculator.
There is also a benefit called Water Direct which is available to some. It’s organised by the Department of Work and Pensions (DWP) and those who already receive Income Support, Income-based Job Seeker's Allowance, Employment and Support allowance or Pension Credit may be eligible.
To find out if you could be benefitting contact your water company directly, or get in touch with the DWP. Our article The smart way to cut your water bill has more information on how you can save money.