Most wholesalers’ statements have indicated that increases will be limited to 5% (there are regulatory limits above this level), although there could be significant further increases from the four wholesalers who appealed PR19 to the Competition and Markets Authority (Anglian, Yorkshire, Northumbrian and Bristol). There are significant variations between water, waste and Trade Effluent, and in particular some surprising disparity of outcome on Trade Effluent. In general, waste charges are increasing more than water.
Thames Water (in a helpful summary statement) has indicated increases in waste charges of 7.1%, and water charges of 2.8%. It looks as though Thames’ Trade Effluent charges will have a lower increase of 1%. Customers in sectors which produce Trade Effluent but without a relevant consent should consider applying for a consent, as this could reduce charges - this could benefit some restaurants, laundries, dry cleaners and car washes.
South East Water and Portsmouth Water are indicating increases of under 5%. Affinity Water is indicating increases within a 4-9% range.
Anglian Water has published an indication, but this will be revised following the final CMA determination of Anglian’s appeal against the PR19 price controls. This is showing increases of approx. 3% for volumetric water and 5% for volumetric waste, although volumetric Trade Effluent charges show an increase of 12.8%. Anglian’s fixed Trade Effluent charges are unchanged, other than customers in the 0.5-5Ml band where fixed charges increase by 33% from £15 to £20.
Wholesalers are entitled under their price control set by Ofwat to recover fixed levels of revenue, and have limited flexibility in how tariffs are calculated in an individual year. With greater vacancy rates and lower water consumption, the revenue is spread across a smaller number of customers, leading to greater percentage increases. As a result of recent events, have seen this happen throughout the year.
We think that in a number of areas this could result in a lower level of increase for Trade Effluent than other water services, as we have seen increases in sectors such as food manufacturing, which are major Trade Effluent producers. Feedback from several wholesalers confirms that they have produced record levels of water this year. However, there has been a reduction in non-household water use and an increase in domestic water use. As a relatively high proportion of domestic water use is unmetered, this does not fully translate into revenue to offset the reduction in non-household demand.
The retail element of charges are, in most cases, a percentage mark-up, so the percentage change to wholesale charges will simply apply to retail charges as well. The exception to this is for small customers with less than 500m3 of demand, where the major element of retail charges is a fixed charge adjusted annually by Consumer Price Index (CPI).
I will provide further details as wholesalers publish more information – I’m conscious that next year will be a tough one with tight budgeting, and want to provide as much detail on tariffs as far in advance as possible.
To clarify, numbers are indicative at this stage, but for customers who need to factor in planning assumptions we would suggest using an increase in business water charges of 5% from April 2021.