Ofwat: PR24 could see three-fold investment boost

Investment levels for the next price review from 2025 are anticipated to be two to three times greater than the current period, Ofwat has said.

Ofwat senior director John Russell

Speaking at the WWT Wastewater Conference, Ofwat’s senior director of strategy, finance and infrastructure John Russell, laid out the need for financial investment now and in future asset management periods (AMP) to meet the challenges the sector is facing.

This will inevitably mean bills will need to increase, but Russell stressed the need for innovation in billing.

“We haven’t seen much price tariff innovation,” Russell said and added that the sector has not had to consider affordability in the same way it does at the moment. “We cannot have a situation where investment doesn’t happen because of affordability.”

In terms of balancing affordability at a difficult time for household finances and the need for increased investment, Russell described the “perfect storm” for the water sector in that the public perception would be of bills rising without discernible improvements to service or performance.

Changes to customer bills for 2023/24 are due to be announced next week for England, Wales and Scotland, which will come into effect from April.

Jon Rathgen, deputy director of water policy at Scottish government, said the impacts of economic pressures on household finances has changed how bills are being considered in Scotland. Scottish Water will announce next week that bills will not rise by as much as anticipated, because, Rathgen said, the cost-of-living crisis means a rise of CPI plus 2% is not feasible.

At the start of the current investment cycle in Scotland, government had given Scottish Water freer reign than previously. The company, which is funded through taxes not water bills, had planned a greater bill rise for 2023/24 than will come into place, which Rathgen said will have consequences for investment and what the company can deliver in the coming years.

Both Russell and Rathgen underlined that communicating bill rises with customers will be a delicate but important task to help billpayers see where their money is spent and what value that brings to service and environment.