Water You Waiting For?

Posted on May 23, 2024. by NTI

The news from the water industry is not pretty at the moment: sewage in Windermere, unsafe drinking water in Devon and the ongoing saga of Thames Water.

Against that backdrop, Severn Trent has decided to increase its dividend to shareholders by 9.1% despite being responsible for 60,000 sewage spills last year.  The increased dividend rate is 70.1p a share and comes with pre-tax profits up just under 20% to £201.3m in the year to the end of March.

Severn Trent, which serves 4.6m households and businesses from the Bristol Channel to the Humber, and mid-Wales to the east Midlands, was responsible spills lasting for more than 440,000 hours.  Or put that slightly meaningless number into another format, that is 50 continuous sewage spills running 24/7 for the full 365 days of a year.  

Earlier this year, Severn Trent was fined more than £2m for polluting the River Trent near Stoke between November 2019 and February 2020.  Its boss, Liv Garfield, was forced last week to defend her £3.2m pay packet for 2023 and the nearly £13m she had received over the past four years. She told the BBC that the 60,000 sewage spills “doesn’t make me feel good”. 

The Consumer Council for Water (“CCW”) has complied figures this week which show all water companies in England & Wales want to increase bills by a minimum of 24% over the next five years.  The maximum increase of 91% is being sought by Southern Water, taking its average bill to £915 a year in 2030.  Somehow Portsmouth Water’s average bill will be only £157 (surely all Portsmouth estate agents are shouting this from the rooftops) compared to its neighbour at Southern Water (covering Sussex, Kent, Hampshire & the Isle of Wight).  Severn Trent wants a 50% rise.

The water firms say the increases will fund £100bn of spending over the period, which will include replacing ageing, leaking pipes and reducing (how about eliminating) sewage discharges into rivers and seas.  Ofwat is scheduled (or was prior to the election announcement) to make the decision this week.

A surprisingly high one in six customers considered the proposed water bill rises affordable, according to a survey Ofwat required the companies to conduct of their own customers.  Mike Keil, chief executive of the CCW, said bill rises were "going to come as a massive surprise to people. People do want to see improvements, they do understand that takes investment, but I think the scale of what’s being proposed here is going to come as a real shock and this is why water companies have double down on their efforts to explain what people are getting for their money," he said.

Yesterday morning, 36MPs from Labour and Green party’s Caroline Lucas wrote to the CEO of the industry regulator, Ofwat, urging him to deny the water companies’ requests in the price review process. The MPs argue in their letter that, on top of illness, worry and inconvenience caused to their constituents by repeated sewage spills, “the excessive price rises proposed will cause them further harm and cannot be justified”.

Will this matter make its way onto any manifestos?

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