Why the south west has the highest water costs and what to do about it

Written by

Tim Greenhalgh

Posted on

September 19, 2019

The highest water costs are found in the south west and businesses through habit often end up paying dearly for their supply.

There are three main drivers why water costs are traditionally higher in the region.

High water costs are due to the sparse population, which means fewer customers share a bigger burden of maintaining and improving quality and infrastructure.

They also have to bear the cost of cleaning up the coastal waters. A third reason is the cost of dividends paid to shareholders.

Low-flow toilets

The pressure on utility costs in the region means that companies are seeking ways of reducing their water consumption – with low-flow toilets a highly effective solution in high-usage settings.

Small and medium-size companies that stay with the region’s “embedded” supplier, South West Water can pay up to 34% more for their water compared to other regions and suppliers.

Since deregulation of the business water market in April 2017, a business can choose any of the 35 Ofwat regulated companies in the water and sewerage sector. Previously, they had to purchase from the regional monopoly where they were based.

South West Water says that the high service prices are partly due to the cost of the many thousands of miles of supply and waste pipes split between a relatively small number of people.

Wastewater treatment

It has to maintain more than 600 wastewater treatment plants across four counties and along two coastlines to serve 1.7 million customers. By comparison, Thames Water serves nearly 4 million customers in East London from its Beckton wastewater treatment plant.

South West Water says:

“The effect on our sewerage charges of having a small community and many beaches is much more dramatic – around 3% of the nation’s population had to support the £2 billion historic cost of the big clean-up of around one-third of the country’s bathing waters. The £50 Government Contribution towards household customer bills recognises this as does the industry’s economic regulator, Ofwat, with whom we agree our charges.”

The company advises that over the past 19 years, it invested £7 billion in services and the environment “redressing decades of neglect and under-investment”

It says:

“Our bathing waters are now the cleanest they’ve ever been with over 98% meeting strict new standards, and this helps the tourist industry to bring billions of pounds into our region.”

Highest water bills

South West Water domestic customers have the highest combined water bills at £491 a year, according to recent data. This is just over £1.30 per day, a 26p increase compared to the average daily rate in England and Wales.

That compares with the average combined bill of £395 and the lowest – the £341 annual charge levied by Severn Trent Water. While this is an increase of £11 over three years (3.33%) it is 15% less than the average for England and Wales (£54 less) and 43% less than South West Water customers (£150 less).

The water and wastewater bill for South West customers has actually dropped this year by £2 and the company says that the average bill will be lower this year than it was a decade ago.

The reduction has been driven by a series of price freezes, bill reductions and below-inflation rises in recent years.

Dividend payments

Privatised water companies have paid out £13.5 billion to shareholders since 2010 – while household bills have gone up by 8%. South West issued dividends worth more than their pre-tax profits in 2017.

Annual dividend payments by water utility firms has jumped by 11% over the past nine financial years, accounting for almost all of the £14.2 billion the companies made in pre-tax profits.

Low flow toilet solution

But hard-pressed customers are looking for solutions to help reduce their annual water costs.

The range of water-saving solutions for businesses and homes is impressive, from low-flow “eco” shower heads and taps that cut consumption by more than 50% to very low flow toilets like Propelair.

The Propelair proposition is compelling and well worth the initial investment costs. It cuts water consumption by 84% along with an 80% reduction in associated energy costs – with just 1.5 litres used per flush.

That translates into rapid return on investment with ongoing savings year after year, against a backdrop where commercial water prices are likely to go on rising.

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