Ofwat, the water regulator, has ordered water companies in England and Wales to cut bills for customers by £50 over five years and spend £51bn on improving services and investment in infrastructure.
In a crackdown on the sector, Ofwat told the water companies to cut the amount of water lost to leaks by 16%, which it said would save enough water to meet the needs of everyone in Birmingham, Bristol, Cardiff, Leeds, Liverpool and Sheffield.
Companies have also been told to identify and help an additional 2 million customers who need extra support and to invest more than £1bn to protect communities at risk of flooding.
Rachel Fletcher, the Ofwat chief executive, said: “Today we’re firing the starting gun on the transformation of the water industry backed by a major investment programme to deliver new, improved services for customers and the environment and resilience for generations to come. Now water companies need to crack on, turn this into a reality and transform their performance for everyone.”
The changes, part of a price review conducted by the regulator every five years, will take effect on 1 April 2020.
The water and sewage companies, which have had a series of serious pollution incidents, will have to reduce pollution of sewage into rivers and streams by a nearly a third. They have also been told to prepare for drier weather by spending £450m on exploring new water resources such as reservoirs.
“We’ve said all along this was going to be a tough review,” Fletcher told BBC Radio 4’s Today programme. We think this is the greenest package ever for water companies.”
She said dissatisfied firms would be able to appeal to the Competition and Markets Authority over the price targets.
Ofwat’s review was been welcomed by consumer groups. Tony Smith, the chief executive of the Consumer Council for Water, said: “Most customers will see this as a good deal but more must be done to make sure everyone can afford their bill and ensure there is sufficient investment in safeguarding these essential services long into the future.”
“Water companies have had it too good for too long. At first glance, it appears Ofwat has listened to our repeated calls for it to get tougher and tip the balance back in favour of customers. But we’ll be keeping a close eye on the performance of companies to make sure customers are not shortchanged.”