The Water Services Regulation Authority (Ofwat) is considering allowing water companies to implement a 'surge pricing' model, which could increase customer charges during periods of drought. The proposed pricing adjustments aim to reduce water consumption by linking costs to factors such as water scarcity, the time of year, and individual usage.
These proposals, if approved, could take effect in April of next year. The move comes as the United Kingdom is experiencing prolonged drought conditions, leading to hosepipe bans and wildfires across the nation. Water companies might impose seasonal charges, making water more expensive during summer months and cheaper in winter, or implement usage tariffs that increase prices once a specific consumption threshold is met. This would incentivize households to conserve water, particularly if droughts persist into the summer.
Water companies have previously trialed similar surge and block pricing models in limited areas. A significant trial involving Anglian Water in Lincoln and Norwich affected 14,000 households. An Ofwat spokesperson stated that efficient water use benefits everyone and that the proposed options would encourage water companies to consider scarcity and efficiency when setting charges, fostering tariff innovation. The regulator is currently reviewing public consultation feedback and expects to make a final decision soon.
The potential introduction of surge pricing follows recent announcements about general increases in water bills. Ofwat previously permitted five water suppliers to raise bills above agreed levels, despite significant water losses from leaks. This decision led to criticism, with some branding the regulator as 'toothless.' Prime Minister Andy Burnham expressed anger over water companies using customers as a "blank cheque."
Scandal-hit Thames Water, along with Southern Water, South East Water, Severn Trent, and Wessex Water, received provisional approval to increase bills between 2027 and 2030. These increases are intended to fund £3.4 billion in new projects, including infrastructure for housing and data centers. However, water bills had already been set to rise by 36 percent between 2025 and 2030, with additional increases in previous years. Southern Water, which lost approximately 37 billion liters of water to leaks last year, faces some of the highest bills, with customers paying an average of £759 annually after an 8 percent rise this year. Thames Water, facing significant debt, was also granted permission to increase bills for its 16 million customers.
Southern Water customers could see bills rise by £80 over the next two years, while Wessex Water customers may see an £11 increase and South East Water customers a £1 increase. Ofwat's consultation on these proposed rises concludes on September 24, with a verdict expected in December. The regulator has stated that company performance will be monitored, with the possibility of clawing back expenditures if expected improvements are not delivered.