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About Us
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New & insight
Everybody wants their water and energy bills to be lower. However, the regulators’ job is to ensure that lower bills can be sustained. To do this bills must cover investment in infrastructure that our growing population needs and to spread the cost of that infrastructure over many years. Unrealistically low bills today can mean underinvestment and water and energy shortages tomorrow, as well as higher costs. That is what we are now seeing in the water sector.
In 2022, NISTA’s predecessor, the National Infrastructure Commission, projected that England needed 31 new reservoirs. The current government have announced nine, of which the first of these will not begin operation until 2036 at the earliest. The UK is facing increasing drought and hosepipe bans in the summer, flooding in the winter, and higher water bills. Water shortages are creating a backlog of key infrastructure such as data centres and housing projects – without water they will not be delivered which will reduce living standards and economic growth.
Head of PIC Capital Strategy
For too long regulators and politicians of all parties focused on keeping bills artificially low in the short-term. Our country under-invested – the clearest example of this is that despite increasing the population by around 12 million between 1992 and 2024, no additional reservoirs were completed.
Now regulators are playing catch up, and Ofwat is allowing water firms to sharply increase bills by 36 per cent between 2025 to 2030 to fund increased infrastructure investment.[1] Southern Water customers had their bills increased by an average of 47% in one go, effective 1 April 2025, to pay for infrastructure upgrades. It did not have to be this way – gradual increases over the last few decades would have provided the finance needed in a fair and predictable manner, as well as keeping infrastructure fit for purpose.
Financing is available - PIC wants to invest more in infrastructure assets whose long-term dependable cashflows match the payments we make to our policyholders. We are currently investing in major UK water projects, including the Havant Thicket reservoir in Hampshire which will complete in 2031, and the Haweswater Aqueduct Resilience Programme (HARP) which will supply water to Cumbria, Lancashire and Greater Manchester. The problem is that there are too few of these type of projects coming forward and those in the pipeline are subject to severe delays.
The Purposeful Finance Commission, which PIC chairs, outlined in its recent report ‘Reservoir Underdogs: Unlocking regulatory challenges to delivering new reservoirs’ some simple steps to fix this, providing the necessary funding to deliver secure water supplies and sustainably lower water bills.
The Government is creating a powerful new water regulator, expected to be established in 2027, by abolishing Ofwat and bringing together the relevant water system functions from the existing regulators (Ofwat, the Drinking Water Inspectorate, the Environment Agency, and Natural England) into one new body. This is a very positive development because it means joining up the key functions of the legacy regulators. This will end the conflicting mandates of different regulators that have plagued investment.
The new regulator could use their new powers to join up flood defence and water provision. Deploying new reservoirs at scale can help manage water stocks increasing an areas climate resilience – these policy areas have too often been managed separately when we need a combined approach.
Using pricing policy to build in a greater margin of safety in water supply means the UK will have room to grow. All the projects that rely on secure water supplies to expand - from data centres, housing and energy production – will be given a boost. With the UK population set to increase by an additional five million people by 2032, and a government target of 1.5 million homes in England to build by 2029, water resilience and the security it brings have never been more important.
Institutional investors such as PIC are ready to deploy capital, what is needed is the supply of investable projects backed by consumer bills that are structured to finance the level of investment required. That requires a fundamental change in regulator mindset. With a new water regulator being created it is the right time to examine whether our system it is delivering the resilient infrastructure we need and deserve.
[1] Water bills to rise further for millions after appeal - BBC News
