Water company shareholders will need to help vulnerable customers bear the cost of living squeeze: Ofwat
Ofwat has suggested shareholders in water companies should cough up more money to support potentially vulnerable customers amid soaring inflation and a cost of living squeeze.
The watchdog urged suppliers to increase funding for social tariffs, and included a rise in shareholder contributions as a potential method for bolstering household support.
It also wants firms to make it easier for customers to apply for help, and boost awareness of available support for customers struggling to pay their bills.
The recommendations follow Ofwat’s latest review of the troubled industry, undertaken alongside the Consumer Council of Water (CCW), as it studies the expected make-up of customers bills from 2023/24.
Rocketing inflation and a global economic downturn is putting increasing pressure on households struggling to pay their rising utilities bills.
The watchdog recently hiked water bills 6.4 per cent for small businesses – following its final decision on retail price caps to factor in inflation.
Ofwat and CCW’s data reveals that water companies are increasing financial support for customers, but both organisations want companies to do more to help in the face of immediate and urgent cost of living pressures.
Chief executives David Black (Ofwat) and Emma Clancy (CCW) wrote to the water companies last October, asking them to make suggestions for how they could reduce the impact of inflation on customers’ bills for 2023-24 financial year.
Water companies submitted their responses to Ofwat and CCW last December – with the watchdog highlighting examples of good practice.
This includes companies putting forward contributions of their own money to fund financial support measures and not solely relying on customer funds.
Plans proposed by water companies include easing the increase in bills due to inflation through deferrals.
There were also commitments to work with other utilities, housing associations, local government and charities to raise awareness and increase take-up of social tariffs.
Black welcomed the proposals, and confirmed he expected water companies to go beyond normal efforts to help households struggling with water bills.
He said “The scale of cost of living challenges mean that this is and must remain a priority – water companies need to continue to improve the support they offer customers. With households facing unprecedented pressures on their finances, customers will expect to see water companies, and their shareholders, go above and beyond to support them.”
Ofwat revealed last month that water and wastewater companies are falling behind on their investment plans leaving promised service improvements behind schedule or undelivered.
It reported that 14 companies underspent their budget on improving their water network, and eight companies underspent their budget for improving their wastewater network between 2020 and 2022.
The main areas of underspend across both categories include drought resilience, improvements to sewage treatment works, improvements to storm tank capacity and reducing spill frequency.
This followed Ofgem imposing enforcement action last year against some of the country’s largest suppliers.
It has slapped six companies with enforcement cases over unauthorised sewage leaks and discharges.
Alongside its work with CCW, Ofwat also teamed up with the Environmental Agency to announce investigations into all water companies last November.