Water companies encouraged to be more creative in how they charge customers

Ofwat is calling on more water companies to trial innovative ways of charging customers, to make bills more affordable and help encourage customers to use water wisely.

Affinity Water, which supplies drinking water across South East England, plans to be the first to implement a charging trial under new Ofwat rules. Due to go live later this year, it will charge around 1,500 pre-selected households a cheaper rate for using a lower amount (or ‘block’) of water, and progressively higher prices for using larger volumes of water. The company expects at least two out of three homes in the trial to pay less for their water than they do currently.

The announcement comes as Ofwat confirms its good practice principles for trialling different models for how people pay for water. Currently, customers’ bills are set on a flat standard amount based on their type of property, or on flat rate based on how much water they use.

Under Ofwat’s updated charging rules, the trials might include:

• seasonal charging to help lower water bills in the winter;
• reducing bills for homes with water butts and permeable driveways which can help to reduce risk of flooding and pollution to rivers and bathing water; and
• charges to support messaging about reducing water use at times when water is less available.

Successful trials could be rolled out to all households in a given area.

David Black, Ofwat CEO said:

“We know that an increasing number of customers are struggling with cost of living pressures. At the same time, water resources are being impacted by climate change which poses significant long-term challenge to river water health and security of water supply. While charging is only one approach, companies need to use every tool at their disposal to support affordability, encourage us all to use water wisely and reduce our impact on the environment.

“We are encouraged that Affinity Water is leading the way in developing ways to reduce bills for customers while protecting our precious water resources. We want to see more companies seeking out and implementing innovative solutions.”

Emma Clancy, Chief Executive of the Consumer Council for Water (CCW), said:

“It is great to see Affinity Water leading the way in exploring how more innovative ways of charging customers can not only make bills more affordable, but potentially also unlock environmental benefits by incentivising households to reduce their water use. There remains huge scope for more innovation and we want other companies to urgently consider alternative charging options to help alleviate the pressure on people’s finances and the water environment.”

The regulator’s good practice principles for charging trials include robust trial design and evaluation, effective engagement with and support for customers, for example in addressing household leakage, and maximising learning across the sector. Ofwat’s customer protections remain in place, including on the overall limits companies can charge customers.