CMA Panel Cuts Water Companies Revenue Requests and Confirms New Pricing Rules Affecting 14 Million Customers Across England

Households served by five major water companies in England will see a modest additional rise in their bills after an independent panel concluded a lengthy dispute over how much revenue those firms should be allowed to collect.

The expert group, appointed by the Competition and Markets Authority (CMA), has finalized its decision after the companies challenged the pricing rules originally set by the industry regulator Ofwat.

In the end, the panel rejected the majority of the water companies’ requests for higher funding but approved a limited increase.

The final ruling allows an average bill rise of about 2.2%, with nearly half of that increase attributed to changing market conditions, particularly financing costs.

How the Dispute Began

The disagreement started when Ofwat released its price control framework for the 2025–2030 period in December 2024.

Price controls determine the maximum revenue water companies can recover through customer bills.

Ofwat’s review concluded that average water bills across England would rise by around £157 over five years, representing an increase of roughly 36%.

However, five water providers argued that the regulator’s decision did not provide enough funding to meet the obligations placed on them.

The companies involved were:

• Anglian Water
• Northumbrian Water
• South East Water
• Southern Water
• Wessex Water

Together, these firms supply water services to about 14 million customers and generate approximately £5 billion in annual revenue.

Using their legal rights, the companies asked for a “redetermination,” meaning an independent review of Ofwat’s ruling.

A Year-Long Review of Evidence

The CMA-appointed panel spent the past year reviewing extensive submissions from:

• The five water companies
• Ofwat
• More than 50 external stakeholders

Those stakeholders included consumer groups, environmental organisations, and investors.

The panel’s task was to strike a balance between keeping bills affordable for customers and ensuring water companies have enough funding to maintain infrastructure, meet environmental standards, and attract investment.

Majority of Companies’ Requests Rejected

The five water companies collectively asked for £2.7 billion in additional revenue.

The panel initially proposed approving £556 million (about 21%) in October during its provisional decision.

However, the final determination scaled that back even further.

The group ultimately allowed £463 million, representing 17% of the amount requested. This means 83% of the companies’ demands were rejected.

The reduction from the provisional ruling—about £93 million—was mainly due to market changes affecting financing costs.

What This Means for Customer Bills

The extra funding will translate into an average 2.2% rise in bills for customers served by the five companies.

This increase comes on top of a 24% rise already planned under Ofwat’s original price review.

Here is how the final decision affects estimated average annual bills (based on 2022–2023 inflation levels):

Water Company	Ofwat Planned Average Bill	Company Request	Final CMA Decision
Anglian Water	£591	£649	£602
Northumbrian Water	£488	£515	No change from Ofwat
South East Water	£274	£322	£284
Southern Water	£620	£710	£641
Wessex Water	£594	£642	£614

Actual household bills may differ depending on water usage and company performance.

Why Some Extra Funding Was Approved

Although most of the requested increases were denied, the panel approved limited extra funding in certain areas.

The money will help companies:

• Meet legal environmental requirements
• Improve water supply resilience
• Reduce pollution levels
• Manage higher financing costs caused by market shifts

Funding is tied to specific projects and performance targets.

If companies fail to deliver promised improvements, Ofwat has mechanisms to reclaim the money, preventing customers from paying for projects that never happen.

Balancing Affordability and Investment

Kirstin Baker, who chaired the independent group, explained that the panel had to carefully weigh competing priorities.

She said most of the requested increases were rejected, but the group allowed limited additional funding where it was genuinely necessary to protect water supplies and tackle environmental issues.

A substantial portion of the approved funding reflects rising costs of borrowing, which have made infrastructure investment more expensive since Ofwat conducted its review.

Debate Over Water Sector Reform

The dispute occurred during growing criticism of how England’s water industry is regulated.

The Independent Water Commission recently concluded that the sector requires major reform, while the UK government has also acknowledged that the current system is struggling to meet environmental, customer, and investor expectations.

Despite that wider debate, the CMA panel was legally required to conduct its review under the existing regulatory framework, leaving larger reforms to the government.

Impact and Consequences

The decision has several implications for both consumers and the water sector.

For customers, the ruling means bills will still increase, but the rise will be smaller than what the companies originally requested.

For water companies, the decision sends a clear signal that regulators will continue to scrutinize spending plans closely, especially when companies seek additional funding from customers.

Environmental groups may see the outcome as a partial win because funding has been directed toward pollution reduction and infrastructure resilience, though critics may argue that broader reforms are still needed.

Meanwhile, investors will likely assess whether the final revenue allowances provide sufficient returns to maintain investment in water infrastructure.

What’s Next?

The CMA has formally submitted its final determination report to Ofwat.

Before the full report becomes public, there is a mandatory process involving Ofwat and the Department for Environment, Food and Rural Affairs (Defra).

This step typically takes at least two weeks.

Once published, the final decision will shape how the five water companies plan investments and manage customer bills throughout the 2025–2030 regulatory period.

Summary

An independent CMA-appointed panel has delivered its final verdict on a dispute between Ofwat and five major water companies over pricing rules for the next regulatory period.

While the companies sought billions in additional revenue, the panel approved only a small portion of those requests.

The ruling allows a modest increase in bills while ensuring companies receive enough funding to meet environmental obligations and maintain infrastructure.

The decision also highlights broader tensions in the UK water sector, where calls for regulatory reform continue to grow.

Bulleted Takeaways

• Five water companies challenged Ofwat’s price controls for the 2025–2030 period.
• The companies requested £2.7 billion in additional funding.
• The CMA panel approved £463 million, rejecting 83% of the requests.
• Customers of the affected companies will see an average 2.2% additional bill increase.
• Funding will support pollution reduction, supply resilience, and environmental compliance.
• Ofwat retains the power to reclaim funds if companies fail to deliver promised improvements.
• The decision arrives amid growing calls for major reforms in the UK water sector.