As a regulated business, the changes they can make to charges are limited. Once every five years a significant, industry wide, exercise is carried out with the water regulator, Ofwat, who fixes the price controls for a five year period. This exercise is known as a Price Review, and was last carried out in 2014 to fix how much revenue can be recovered for the 2015-20 period.
The Price Review assesses what activities are required to keep operating and to fulfil all Northumbrian Water (NWL) and Essex & Suffolk (ESW) legal obligations. The assessment looks at what maintenance, new investment and operating costs will be needed as well as taking into account that efficiencies must be made.
NWL and ESW invest some £50 million per year on essential improvements, and have committed to investing £250 million from 2015 to 2020. Their charges reflect the large scale investment they have made to secure water resources for the next 25 years, specifically the work carried out on the Abberton reservoir. This means that in the south east where water is scarce, customers can be confident that they can continue to enjoy a reliable and excellent quality supply of water.
While water may fall from the sky, delivering clean, safe and reliable water to your property is more complex. They have to abstract the water from the environment and then clean the water to the required quality standards, and move the water to your property, which involves electricity and other equipment to pump the water through the pipes. Therefore, the increase in prices in each year reflects what the wholesaler needs to do in order to continue to deliver the safe, clean and reliable water that their customers expect.