The simmering tensions between UK water utilities and their chief regulator have erupted into a full boil, as Anglian Water launches a formal appeal against Ofwat’s recent ruling on the scope of permissible bill increases over the coming years. The East of England supplier, which serves over 4 million customers, is petitioning the Competition and Markets Authority (CMA) to allow it to hike bills by a whopping 32% between 2025 and 2030 – a request Ofwat had largely rebuffed in its latest price review determination.
Ofwat’s “Unacceptable” Ruling Challenged
In December, the water industry regulator capped Anglian’s potential bill increases at 29% over the five-year period, enabling £11 billion in total expenditures but falling short of the company’s desired infrastructure investment plans. Anglian CEO Mark Thurston blasted this decision as “unacceptable,” arguing it piles undue financial pressure on the business and jeopardizes vital upgrade projects across its growing service territory.
Ofwat’s stated aims for this settlement were to align the interests of companies and investors to those of customers, by setting the appropriate balance of risk and return. Unfortunately, after extremely careful consideration, the Anglian Water board has concluded that Ofwat’s final determination falls short of its own stated aims.
Mark Thurston, CEO of Anglian Water
Funding Gap for Critical Upgrades
The East of England, Anglian’s core market, faces unique infrastructure challenges due to its concentration of fast-growing cities and strategic development initiatives like the Cambridge-Oxford arc. Thurston emphasized that the “levels of investment needed are significant,” hinting that even Ofwat’s approved £11 billion budget – a £4 billion boost over the previous period – may prove insufficient to keep pace.
Anglian’s appeal asserts it has already baked in nearly £1 billion worth of efficiency savings, leaving little slack to absorb Ofwat’s revenue clampdown. The CMA filing stresses the urgency of projects like the construction of two major new reservoirs in Lincolnshire and Cambridgeshire to bolster the region’s stretched water supplies.
Echoes of Thames Water Turmoil
Anglian’s revolt comes on the heels of a similar appeal lodged by Thames Water, the UK’s largest supplier, which initially sought to raise bills by an eye-popping 59% before Ofwat intervened. The beleaguered utility, now teetering on the brink of financial collapse, has also turned to the CMA to loosen the regulator’s tighter 35% increase limit so it can shore up its balance sheet.
While Anglian is on much steadier fiscal footing than its Thames counterpart, both companies’ parallel appeals underscore the sector-wide friction between Ofwat’s affordability mandates and water suppliers’ mounting infrastructure liabilities. As climate change and population growth strain aging water systems, the price tag for essential upgrades is soaring – setting the stage for further clashes over who will foot the bill.
CMA Thrust Into Growth vs. Equity Tightrope
The Competition and Markets Authority finds itself in a precarious position as referee in these escalating disputes between Ofwat and the water industry. On one hand, the watchdog agency is under intense pressure to fast-track infrastructure investment as part of the government’s overarching “pro-growth” agenda. But concerns about the crushing impact of bill hikes on squeezed households also loom large, particularly after inflation’s painful bite.
We need to go further is to make sure that perceptions of the regime haven’t created a chilling effect.
Sarah Cardell, CEO of the Competition and Markets Authority
CMA chief Sarah Cardell recently acknowledged the challenge in striking the right “balance” to spur investment without overburdening consumers. As the authority prepares to rule on the Anglian and Thames appeals in the coming months, its verdicts could have far-reaching ramifications for the nation’s H2O affordability crisis – and set key precedents for the next round of industry price reviews in 2030.
While the immediate fiscal fate of millions of water customers hangs in the balance, the deeper dilemma facing regulators, utilities, and policymakers is clear: in an era of both mounting infrastructure imperatives and cost of living pressures, what’s the most equitable way to divvy up the tab for fortifying our water future? As the CMA grapples with that conundrum, all eyes in the industry will be trained on the outcomes of these pivotal cases.
