Water companies could be allowed to raise bills during droughts, under new surge pricing plans being considered by the regulator.
The regulator, Ofwat, is mulling rule changes which would allow higher water prices in summer months, aimed at reducing consumption during times of scarcity.
Almost three quarters of England is now in drought following prolonged dry weather and millions face restrictions on water usage. At the same time, water bills are already set to rise by more than a third by the end of the decade.
The plans have met with a mixed reception with some saying they will create a “new class of ‘water poor’,” with access depending on your ability to pay.
Uber-style surge pricing or higher bills for heavy users
Water companies have already been trialling different schemes to limit consumption.
One surge pricing trial of around 14,000 households served by Anglian Water in Lincoln and Norwich found that almost half of those involved cut their water usage.
From a baseline of £2.69 per cubic metre, costs increased to a high of £4.39 in summer months and fell to £1.78 for the rest of the year.
Under another method, block pricing, trialled by South West Water, where lower levels of water usage are cheaper but unit prices rise once customers pass certain thresholds.
While a consultation on changes took place from June to July, the regulator has yet to make a final decision, but if approved, plans could be in effect from April and would require homes to be fitted with smart meters.
In that consultation, Ofwat proposed allowing firms to account for “Supply-Demand balance” by setting rates based on “incentives to promote greater water efficiency and the associated environmental and wider societal benefits.”
Denver, Colorado, introduced a similar scheme in April this year. Essential water usage – such as any used for bathing, cooking, and flushing toilets – was exempt from higher tariffs, but customers faced increased prices for outdoor watering and even steeper rates for “potentially excessive water use”.
Over 27 million people living with water restrictions
Exceptional heatwaves have pushed 71.3 per cent of England into drought.
August has seen 5 per cent of expected rainfall and July was the driest in 190 years.
Natural England has counted 245 wildfires on Sites of Special Scientific Interest, and just 14 per cent of rivers are at normal levels. Reservoir levels are 11.6 per cent lower than expected.
Over 27 million people are living with restrictions on water use as eight water companies have imposed Temporary Usage Bans.
As early as May, households in Whitstable, Kent, were left without regular tap water as reservoirs hit a “critical level”, and water companies have warned that areas including Southampton and Norwich risk taps running dry without further restrictions.
A ‘No Fishing’ sign in the dried up Falmer Pond in Falmer, East Sussex (Photo: Glyn Kirk/AFP)Earlier this summer, a water outage in Tunbridge Wells which left tens of thousands without drinking water.
This comes as the UK’s biggest utility company, Thames Water has warned it could run out of cash by the end of 2026 without action.
Bills are rising as water companies seek cash to fix infrastructure problems
The surge pricing plans come as customers across the country grapple with increasing bills.
Water bills rose by an average of 5.4 per cent in April 2026, representing an annual increase of £33. However, the previous year saw customers hit with a 26 per cent average increase.
In 2024, Ofwat approved plans for companies to invest £104bn by the end of the decade, leading to forecasts of a 36 per cent increase in bills.
On Thursday, Ofwat allowed five companies to spend an extra £3.4bn between them, including money to facilitate housebuilding and data centres. This will add between £1 and £43 to annual bills for those affected.
Prime Minister Andy Burnham said customers should not be seen as a “bottomless source of funding”, while environment secretary Angela Eagle said “years of underinvestment and toothless regulation has led to this”.
Sharp bill increases for infrastructure are the result of years of underinvestment, the government said in February as witnessed by the residents of Amersham, who are under a hosepipe ban while also watching a pipe spill water into a road for 56 days until it was fixed.
Water companies accused of penalising customers for their own failings
The plans have been branded the worst idea since privatisation by one campaigner.
Sophie Conquest, lead campaigner at public ownership campaign group We Own It, told The i Paper: “Each week they come up with a new bad idea to make up for spending the last 30 years extracting dividends and loading up those water companies with debt, instead of investing to drought-proof our water infrastructure.
“Surge pricing for water will mean that your ability to access water will depend on your ability to pay; it will create a new class of the ‘water poor’.”
But Nicci Russell, CEO of water efficiency organisation Waterwise, said everybody had a part to play as the country faces running out of water.
“Water scarcity is a national emergency in both England and Wales. It’s right that water efficiency and water scarcity play a greater role in the water sector, and trials of these behavioural nudges on pricing have proved effective for reducing water waste,” Russell said.
Feargal Sharkey, the Undertones singer turned water campaigner, told The Daily Telegraph: “For 40 years, these companies have had legal obligations to help consumers to reduce their demand and they have failed at that comprehensively, just as they’ve failed to keep our rivers clean and failed to deal with our sewage.”
A government spokesman said it was “protecting households” from the cost of living and that it was giving more money for new infrastructure.
“Water companies are trialling new charging structures which must, as promised, make bills fairer and more affordable while encouraging greater water efficiency,” they added.
An Ofwat spokesperson said a decision on measure would be made soon but that “the options we are progressing would support greater consideration of water scarcity and efficiency by water companies when setting their charges, and encourage more tariff innovation”.
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