Water price rises

Water prices are regulated by Ofwat, which reviews water prices every five years. Under these reviews, water companies will submit the new water prices they think are necessary. Ofwat will review these suggested water prices and decide upon a water price increase that is acceptable to both customers and the water companies.

In April 2006 UK households saw their water and sewerage bills rise by an average of 5.5% while water suppliers have since announced record profits. However, suppliers argue they invest £3 in improving services for every £2 they make in profit. Water companies have also invested more than £50 billion in pipes, reservoirs and water treatment works since privatisation.

• 1990 to 1995 - 5% above inflation
• 1995 to 2000 - 1% above inflation
• 2000 to 2005 - Fall of about 2%
• 2005 to 2010 - 4.2% above inflation

Ofwat's 2005-2010 review set price limits that allowed water companies to raise prices by an average of up to 4.2% a year on top of inflation - meaning that the average household bill would rise by £46, or 18%, to £295 during the period.

It also agreed that water suppliers could make a return on their assets of 5.1%, meaning that for every £100 investors put in, they could expect to get £105.10 back.

As the UK, particularly the South experiences dry winters and falling water levels, the water industry is in discussion with the government to decide how the UK can deal with water shortages in the future. While it is clear we can no longer take water for granted the cost of water to consumers is an on going debate. Water companies want us to pay more for our water and there are calls for water meters to be fitted as standard. However pressure groups argue that if a water supplier restricts supplies, customers should pay less.