Water companies say they need £21bn for upgrade

Water companies yesterday argued that household water bills would need to rise by about £15 annually in the five years to 2010 to cover the cost of upgrading and repairing water mains and sewers.

The utilities reckon that they will have to spend around £21bn in that period to keep the system up to scratch - an increase of about 25 per cent on the estimated £17bn spend for the five years to 2005.

The companies estimated that consumers would see the average annual bill in England and Wales rising to about £315 by 2010 from the £240 average bill expected next year.

The proposals were unveiled yesterday by Water UK, an industry body representing the country's water and wastewater service suppliers like Severn Trent and United Utilities.

Pamela Taylor, Water UK's chief executive, stressed, however, that the proposed bill increases were "early best estimates" since the regulator, Ofwat, will enter a lengthy consultation period before announcing new controls in November next year.

"They are proposals for meeting the requirements of environmental and quality regulators; the maintenance of pipes and works; the expectations of customers; and the need to improve security of supply," Ms Taylor said.

The proposals put forward by the water companies are the first step in the review process being carried out by Ofwat to help it set price limits for the five-year period. The result of the last review, which came into effect in April 2000, saw household bills fall by about £30, Water UK estimated.

Ms Taylor insisted that the proposals represented "good value" for consumers. "If you looked at the increases over the decade from 1999-2000 to 2009-2010, the average annual increase would be £5, with a range of £0 to £15 each year," she said.

But the proposals were met with concern from elsewhere. Peter Bowler, director of consumer group Water Watch, said: "Customers' bills have increased significantly since privatisation. It's true that the underground network is in a mess, but it should be shareholders footing the bill and not the customer."

The Shadow environment secretary, David Lidington, said: "An increase in water bills would hit many families and the elderly very hard. A careful balance must be reached between the consumers and the water industry on an improved water system and lower prices."

The individual water companies will start publishing their draft business plans from today while Ofwat enters a consultation period on the issue. After that process is complete, the water companies must submit final business plans. The regulator will announce its price limits in November next year, which will come into effect on 1 April 2005.