Ofwat welcomes PR24 affordability boost but highlights company differences

Ofwat has welcomed that water companies will double the proportion of customers on social tariff support in the next price period, but called for a “cultural shift” towards better service delivery for customers who need extra help.

The regulator said in a blog that it expects firms to “communicate clearly, handle complaints efficiently, and ensure everyone who qualifies receives the support they’re entitled to” once PR24 bills are finalised. It said this was a “golden opportunity to start restoring customer trust” and said it would impose fines where customer care falls short of expectations.

Ofwat has taken stock of water companies’ published plans for affordability 2025-30. This showed 9% of customers, up from the current 5%, should be on social tariff support by 2030 (see table). This masks a wide range between firms, with United Utilities (UU) due to see 15% of customers signed up, compared with 5% at South West Water and Yorkshire.

There is enormous range too in the average cross-subsidy per customer targeted. This is £26 on average for a combined bill or £8 for water-only service, ranging from £55 from Thames Water to £2 at Portsmouth. Note that affordability support need varies considerably between areas.

In all, the total annual funding for social tariffs across all companies is forecast to reach £640m per year on average by the end of the period, up from £235m annually on average in the current period.

In terms of the average bill reduction to be applied across all measures (social tariffs and other schemes/outperformance payment sharing), Thames’ customers will get the most generous support, worth £528. Hafren Dyfrdwy is at the other end of the spectrum with £124. South East Water is offering particularly generous support for its water-only service, with bill reduction on average at £231.

Five firms are offering shareholder support for social tariff payments: Welsh, Northumbrian, UU, Yorkshire and SES. Shareholders at all companies except Affinity offer shareholder contributions for other affordability schemes. In terms of total funding from shareholders as a percentage of regulated return on equity, Welsh Water, UU and SES make the highest contributions, with Affinity, Thames and South East the lowest.

Ofwat’s most recent wave of cost of living research found one in five billpayers struggled to pay their water bills in the last year. Despite an increase in awareness of available support, two-thirds remained unaware of the help their water company can offer.

Separate joint research by Ofwat and Ofgem highlighted complex needs among vulnerable customers. Overall findings included that these customers lacked awareness and understanding of the services available, and had mixed experiences when seeking support. However, it also found that their stated customer needs generally aligned with basic customer service principles.