Ofwat has announced this morning that the average household water and sewerage bill across England and Wales will increase broadly in line with inflation in 2011/12.

The average bill is set to rise by 4.6 per cent or about £16 to £356. This takes into account a reduction in the average bill of 0.1 per cent before inflation of 4.7 per cent.

Regina Finn, Ofwat Chief Executive Officer said:

"People can shop around for the best deal on many things, but not water. Our job is to do this for them.

"No one wants to see bills increasing, particular in tough economic times. When we set limits on prices, we listened to customers and challenged companies hard. That's why average bills are set to remain broadly in line with inflation up until 2015, while companies are investing more than ever before, £22 billion. That's more than £935 for every property in England and Wales.

"This will deliver real benefits to consumers - from almost ten million people's water supplies being better protected from events such as flooding to cleaner rivers and beaches.

"If companies don't deliver for customers, we will take action. In the last five years, companies have had to pay out more than £500m, from their own pockets, following underperformance."

The bill changes for this year will come into effect on 1 April 2011 and apply until 31 March 2012. The impact of the new charges will vary for individual household customers depending on the company that supplies them and whether or not they have a water meter. Customers of water-only providers will see the greatest and smallest increases respectively -  Essex and Suffolk (part of Northumbrian Water) has an increase of 9.1%,  while Portsmouth Water has an increase of 2.5%.

Consumer watchdog expresses concern over increases

However, the Consumer Council for Water (CCW) said that many water customers in England and Wales would be surprised by the bill increases.

The consumer watchdog said that in 2009, Ofwat announced that average water bills would, in real terms, remain broadly flat until 2015, but the impact of an inflation rate of almost 5% would mean many water customers paying more – and water companies enjoying an unexpected financial gain.

Dame Yve Buckland, Chair of the Consumer Council for Water, said:

“Under the current system of regulation, water companies are allowed to add inflation to the price limits agreed with Ofwat. We recognise that water companies are facing some additional costs in other areas and that there are ‘swings and roundabouts’ on this issue. However many water companies and their shareholders will benefit from higher inflation.

“Many customers are struggling with rising household and other bills and debt is rising. Already one in six customers tells us that they cannot afford their water bill. The bill announcements today will particularly add pressure to some customers in the south west of England, who already pay the highest bills.

“We want the companies to demonstrate to customers what they are getting for their money, and also to think how they might share the benefits of this unexpected financial gain with their customers.

“Water companies need to make profits and that’s fine, but when water companies have done well financially in the past, the Consumer Council for Water has been successful in persuading them to give back £135m to customers in the form of lower prices and additional investments in the water and sewerage network, to benefit customers. We will be talking to the companies to see how this can be repeated in this price period.”