Neil Pendle, CEO of Waterscan, provides a detailed analysis of the PR24 Final Determinations’ impact on large water users, specifically in the Self-Supply community.
He highlights two major issues: the discrepancy between headline price impacts for businesses and what they will actually face, and the lack of transparency from regulators and water companies about these increases.
Key points
Front-loading and inflation
While Ofwat reports a 36% average increase for households over five years, the most significant price hike will occur immediately in the first year, amounting to around a 20% increase. However, inflation hasn’t been factored into these figures, which will push up the final cost for households by 53%. The water sector has not adequately communicated this to customers.
Business customers and tariff rebalancing
To mitigate the impact on domestic customers, water companies are increasingly shifting the burden of price hikes to business customers, particularly large users. While this approach might be rational from a resource management perspective, it has been poorly communicated, leading to potential shock for businesses come April. Larger businesses, including multisite operations and high-consuming sectors, are likely to see price rises significantly above the national averages, potentially as high as 90-100% in some regions.
Lack of transparency
Neil criticises the lack of early communication and transparency from water companies and regulators, leaving businesses unprepared for the full extent of price hikes. This has left many without the opportunity to budget and plan effectively for the changes, forcing last-minute adjustments.
The need for better communication
Waterscan urges the water sector and regulators to improve transparency in future pricing rounds. Businesses should be informed early about changes, and incentives for water reuse or alternative water sources should be explored.
A silver lining: Innovation and water efficiency
Despite the challenges, Neil sees an opportunity for businesses to embrace innovative water management solutions. The rising costs of water have made the investment case for water efficiency even more compelling. Businesses are expected to increasingly explore alternative water sources, which could spark innovation and new market opportunities. Water efficiency not only helps mitigate price increases but also provides a foundation for economic growth, shifting the focus from environmental sustainability to practical business needs.
The message to businesses is clear
Prepare for significant price increases and leverage this as an opportunity to invest in water efficiency, while calling for a more transparent and proactive approach from regulators and water companies moving forward.
The Water Report interview
