Castle Water CEO John Reynolds gives a first view of tariff changes for April 2026
John Reynolds, OBE
8% average water tariff increases for 1 April – this really is a black-box, look carefully when preparing budgets
We have had first sight on indicative water tariff changes for 1 April 2026. There is no clear pattern. Changes vary from +3% to +30% for some customers. And the variation in movement between water and waste is still high – waste charges reduce by 5.4% for Southern with water charges increasing by 18.4%. The devil is very much in the detail for individual customers – bizarrely, United Utilities has a 22% increase for Places of Worship.
As many of you need to know what to prepare for in your budgets, here’s the summary for the major Wholesale areas affecting Castle Water customers (this is all indicative, there can be significant changes between now and January):
Water
Waste
Combined
Thames
10.0%
-3.9%
4.5%
Severn Trent
4.2%
11.9%
9.2%
United Utilities
20.6%
9.0%
11.0%
Anglian
12.0%
8.0%
10.0%
Southern
18.4%
-5.4%
5.1%
South East
10.6%
10.6%
Affinity
11.9%
11.9%
Portsmouth
3.0%
3.0%
There is a lot of detail and variation in these headline numbers, and to really estimate accurately for budgeting for 2026-7 you will need to look at individual tariffs. I would flag these key points to look at:
Thames: a low inflation estimate of 3.5%, so these numbers are likely to be an under-estimate by around a half percent. Thames is still unclear if it will go to the CMA. If it goes to the CMA, 2026 tariffs will not be affected. Unusually, if it doesn’t go, customers could see further tariff increases as Thames may agree a revised price control as part of its debt restructuring. There is also a move of some large customers between tariff codes, and this will impact individual customers.
Severn Trent: there is about a 2.5% range in the increase in combined water+waste bills
South East: phasing out the Falling Block Tariff. This increase charges for large users by c. 5% above the average
Portsmouth: standing charges for most customers reduce by 10%
Affinity: the averages are the least useful here. There is a major change in tariffs for “Large” customers, with customers with 50,000m3 seeing a 2% reduction (pre-CMA) but “Extra Large” customers seeing an increase of 29%
Disclosure: for complete transparency, note that Castle Water and its shareholders have made a proposal to recapitalise Thames Water.
CPIH
Estimates of CPIH vary from 3.5-3.8%. Expect higher increase from Thames, who is at the low end of this range.
The CMA
The CMA initial decision for the 5 companies which challenged Ofwat gives a change for 5 companies, 3 of which will be noticeable in tariffs:
Wessex: +4%
Southern: +3%
South East: +4%
Anglian: +1%
Northumbrian: +1%
These increases are for the full 5 year period 2025-30.
The impact for Anglian and Northumbrian is unlikely to be significant on tariffs, although it is worth noting that they had a reduction in allowed cost offset by an increase in allowed (financial) return on capital.
Large user tariffs
It is completely unreasonable that Ofwat is consulting on changes to Large User tariffs, but some Wholesalers are already changing their approach without waiting for Ofwat to even complete the consultation exercise. We believe that other Wholesalers including Thames intend to follow, probably in 2027. I have asked Ofwat to meet with customers to explain their approach, and listen to customers views directly – Ofwat has not accepted this offer, which is very disappointing. In the water price control review process, there is a requirement for both evidence and for consultation with customers. It is remarkable how little (apparently non-existent) information is available on the economic analysis and customer consultation to justify these changes.
This is a black box
It is practically impossible for 3rd parties to correctly estimate tariff changes on an annual basis, as they continue to be influenced by too many complex components:
ODIs and other incentives, based on both absolute and relative performance
Current and historic consumption vs estimates
An increased proportion of “gated” schemes, where Ofwat determines on a continuous basis what is allowed or disallowed
Changes in policy for charging different categories of customer, this time Large Users
If you have concerns about your specific charges, please contact your Castle Water relationship manager, or you can email me directly at ceo@castlewater.co.uk
John
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