Thames Water, the troubled utility company, has unveiled new plans to boost spending and investment in its network, but these changes could lead to a 44% increase in customer bills.
The water giant, which serves 16 million customers in London and the Thames Valley region, is facing a funding crisis. It’s proposing to spend an extra £1.1 billion and is considering an additional £1.9 billion in investments, part of a new business plan submitted to regulator Ofwat.
The revised plan for the five years leading up to 2030 outlines a total expenditure of £19.8 billion, with the increased budget directed toward environmental projects. Thames Water indicated that this spending could see customer bills rise in line with the previous proposal, predicting a 40% increase over the five-year period.
However, if the additional £1.9 billion in investment is approved, average customer bills could go up by an extra £19, resulting in a 44% total increase over the five years. This would push annual bills to £627 by 2030.
Chris Weston, Thames Water’s chief executive, stated, “Our business plan focuses on our customers’ priorities.” He explained that the updated plan aims to deliver more environmental projects and that they would continue discussions with regulators and stakeholders.
The company’s financial troubles are largely due to a £15 billion debt burden. Investors have refused to inject the required cash, and there’s speculation that the Government might nationalize Thames Water, with taxpayers potentially covering its significant debts.
The original business plan published in October aimed for a 40% increase in customer bills to fund an £18.7 billion investment program. But Ofwat’s regulatory constraints led to shareholders withdrawing a £500 million emergency funding package due at the end of April. With only £2.4 billion in cash available as of February, Thames Water could remain solvent until next year, but the long-term outlook remains uncertain.
The company’s major shareholders include the Universities Superannuation Scheme (USS), China’s sovereign wealth fund, a Canadian pension fund, and the BT Pension Scheme. Thames Water is reportedly discussing funding options, possibly through new loans, as it looks to bridge the financial gap for its five-year plan.
Ofwat is set to make an initial ruling on the proposed business plan, known as PR24, on June 12. Thames Water is also under scrutiny for missing sewage spill and leakage targets, which has compounded its issues.
Liberal Democrat Treasury spokeswoman Sarah Olney voiced her disapproval, stating, “It would be an absolute disgrace if customers are forced to foot the bill for Thames Water’s shambolic failings.” She announced that the Liberal Democrats would table a bill in Parliament on Monday, aiming to place Thames Water into special administration.
The unfolding situation around Thames Water raises serious concerns about the company’s ability to navigate its financial turmoil without placing a heavy burden on its customers or relying on government intervention. The next steps depend on Ofwat’s response and the company’s efforts to secure new funding while maintaining service and meeting environmental targets.
