The water bill predicament

Delivering value for money to customers in a cost-of-living crisis

Olly Worsfold, Director of Savanta’s Energy and Utilities Practice, takes a look at the latest findings from Ofwat’s Cost of Living research.

Olly Worsfold Director 06/22/2023

In March 2022, 14% were dissatisfied with water companies’ value for money, a year later this has doubled to 28%.

The impact the cost-of-living crisis is having on households across the UK is not just isolated to a small group within the population. Data from our recent Cost of Living research for Ofwat shows that half (49%) of billpayers in England and Wales expect to struggle with paying a utility bill in the next year.

Water bills versus the rest: A smaller burden, but a growing problem

Water bills are unique in that water companies cannot cut off households for non-payment. They are also usually relatively small when compared to other household bills, particularly energy and food which have both increased substantially in the last year. Nonetheless, our data shows a worrying trend: 23% are currently struggling to pay a water bill, up from 15% in early 2022.

Like other utilities, water companies do have support in place for those that are struggling with their bills. However, this is not widely known with the research finding only three in ten (29%) are aware of the support available. Crucially, the data shows that of those struggling with their household bills, just 12% reported using this support.

A rising tide of dissatisfied customers

As a growing proportion of water customers struggle to pay their bills, there is rising dissatisfaction with water companies’ value for money. Customers are increasingly unconvinced that the services provided by water companies are worth the bills they must pay. In March 2022, 14% were dissatisfied with water companies’ value for money, a year later this has doubled to 28%. In the same period, the satisfied proportion fell from 55% to 40%.

This perception of decreasing value for money is tied up with water companies’ wider reputation and perceived ability to deliver across all service areas. The proportion of customers that trust water companies to take away wastewater and sewage and deal with it responsibly fell from 62% to 43%. In addition to this, trust in water companies to invest sufficiently in the water network was at 51% in March 2022, falling to 36% in March 2023.

Against the backdrop of a cost-of-living crisis, the water industry has seen a growing struggle to pay bills, rising dissatisfaction with the value for money that water bills represent and falling trust in water companies’ abilities across all service areas. Looking forward, the threat of combatting climate change and achieving Net Zero looms large, which will require significant investment from water companies and therefore higher bills.

Shifting the conversation: the environmental perspective

It’s therefore easy to be pessimistic about the future and to predict further dissatisfaction amongst customers, especially with the increased focus on dividends paid to shareholders and bonuses received by Executives. However, this is avoidable for the industry. If bills must increase to protect the environment and combat the effects of climate change, customers can perceive this as providing them greater value for money.

For this to happen depends on water companies’ ability to draw a straight line from customer bills to specific areas of investment and their impact on local communities and the environment. This would move the conversation from a negative one in which customers are increasingly angry about river water quality, to a more positive discourse about the deployment of innovative technology, and the protection of biodiversity and the environment. The measurable success of this investment by water companies will also need to be linked to dividends and Executive pay to rebuild trust and show that all parties are paying their fair share to combat climate change.

Water under the bridge

The water sector cannot control the economic climate in which it is operating, but this should not make it fear the investment that is needed to meet the industry’s environmental targets. The opportunity to change the conversation around the water industry is in its own hands, to take advantage companies must act decisively to show the public they can be trusted for the preservation of the country’s waterways.

The findings in this article are taken from an online survey conducted by Savanta between 20th-31st March on behalf of Ofwat. The full report can be accessed here: https://www.ofwat.gov.uk/publication/cost-of-living-wave-3-report/.