This piece explains how ministers plan to influence Ofwat’s next price review and what that could change for water companies, investment and bill payers.
A new role for ministers
The UK government plans to intervene in the next water price review for England and Wales, making an unprecedented move in a process previously run by Ofwat alone. Environment secretary Angela Eagle has written to water companies and regulators, saying the review must deliver better value for money and keep bills affordable. Her instructions include earlier action on leaks and sewage overflows, greater use of technology to reduce costs, and stronger communication with local communities and leaders. The letter stops short of demanding bill cuts, but says the review will not be business as usual. Ministers describe the intervention as the start of a longer transition in how the water sector is managed.
How the price review works
Ofwat’s five-year price review is the mechanism that links companies’ investment plans to household bills. Water firms submit business plans setting out proposed spending on infrastructure, services and running costs. Ofwat examines those plans and determines how much companies can charge customers to fund them. The next process is expected to conclude in 2029, but the government wants companies and the regulator to act before then, while investment decisions are still being developed. Defra sources say a forthcoming 10-year plan will give ministers stronger powers to keep bills affordable and direct local investment. Eagle’s immediate intervention uses the influence the government already has over the process.
Pressure after the last settlement
The intervention follows the 2024 price review, in which Ofwat authorised a £104bn modernisation programme funded largely through annual rate increases. Average water bills are expected to rise by 36% over the second half of the decade, while Southern Water customers are due to pay 53% more by 2030, at an average of £642 a year. Several major suppliers have also sought permission to charge billions more for capital costs and debt obligations. The prime minister has criticised the treatment of bill payers as a source of funding for corporate failures. Campaigners at We Own It argue that the proposed changes will not do enough to reduce bills or environmental damage, but no change to ownership has been announced as part of this intervention.
What the intervention may change
For water companies, the direction of travel is towards investment decisions that demonstrate value for money, with priority given to preventing leaks and sewage spills before problems worsen. For the regulator, the letter sets government objectives that will shape the context in which business plans are assessed, although the source does not say that ministers will take over Ofwat’s formal price-setting role. The government is also considering wider changes to the industry, including ownership structures, while examining options for Thames Water. Those discussions are separate from the price review, but show how the immediate instructions fit into a broader attempt to change the water system.
IN NUMBERS
The practical test will be whether early intervention and tighter direction can improve services while limiting the pressure on household bills. The next price review remains an Ofwat process, but ministers have made clear that affordability, leaks, sewage and local decision-making will be central to their expectations.
Reported from theguardian.com, 2026-10-23. The Tender Wire is published by Otnox.
