WATER bills could jump as much as 27% above inflation in the next 20 years without an overhaul of an "unsustainable" UK water industry, utility firm Severn Trent said today.
Its report said the £96bn in capital spending by the industry projected over the next two decades and rising operating costs would be difficult to bear for a sector already laden with £32bn in debt.
Severn said the increased investment – along with the rising cost of borrowing since the financial crisis – would have to be passed on to customers.
More energy-intensive water treatment under European regulations will also impact the industry’s environmental performance, the firm said.
“It is not clear that such a continued high level of investment is sustainable in terms of whether it can be financed, whether customers are willing to pay for it and the associated detrimental impact on carbon emissions,” Severn added.
Severn believes it can save £10bn over the next 20 years, improve the industry’s green performance, and keep customer bills 11% below where they could be if no action was taken.
It also wants the introduction of water trading between regional firms to improve competition, as well as a “more flexible” interpretation of European water directives “assessing whether costs are disproportionate to benefits”.
Severn said the regulatory regime overseen by Ofwat and the Environment Agency often encouraged “risk averse” and capital-intensive solutions instead of encouraging sustainable alternatives.