Water companies to introduce ‘surge pricing’ during droughts under new plans

Water companies will be able to introduce “surge pricing” during droughts under new plans being considered by Ofwat.

Firms will be allowed to charge higher prices as water becomes more scarce as part of a drive to reduce consumption.

Most of the new pricings schemes would require households to have smart water meters.

Proposals would take effect from April if approved by regulator Ofwat.

Angela Eagle, the Environment Secretary, previously said the water was “toothless” and pledged for “fundamental reform”.

And Feargal Sharkey, the water campaigner and former Undertones singer, told The Telegraph suppliers were penalising consumers for their own failures.

He said: “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 seasonal surge pricing system would allow water companies to lower prices in winter and increase in summer.

Rising block tariffs would also charge higher prices after consumers pass a certain threshold of water use – those using an “essential” amount of water would pay a basic rate, with further usage increasing prices.

There are no formal plans to introduce widespread surge pricing, but Ofwat’s consultation said suppliers considered the current rules a block to the scheme.

In principle, Labour and Ofwat have backed the price revisions, but the reforms could prove controversial at a time when utility companies are already under fire for raising bills.

On Thursday, five water suppliers were given permission to increase charges for customers to support network upgrades by the end of the decade.

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Andy Burnham warned water companies against treating people like a “blank cheque”.

“Where water companies seek to pass unnecessary costs on to households, they will be challenged,” the Prime Minister said.

“Our water industry has clearly not been working for people for far too long. That’s why this Government will be looking at how we can give the public more control and help keep bills as low as possible.”

Debt-ridden Thames Water is one of the five suppliers given permission to increase prices, despite handing a £1million payment signing bonus to an executive and calls for it to be placed under special administration.

An Ofwat spokesman said: “The efficient use of water is in the best interests of everyone, including businesses.

“The options we are progressing would support greater consideration of water scarcity and efficiency by water companies when setting their charges.”

And a Government spokesman said: “This Government is committed to championing consumers and protecting households from cost of living pressures.

“We have already ring-fenced money earmarked for new infrastructure so it can only be spent on fixing the problems, and will go further by fundamentally reforming the water sector so that it works for the public, keeping bills as low as they can be.

“Water companies are trialling new charging structures which must, as promised, make bills fairer and more affordable while encouraging greater water efficiency.”