Business

Why can't you switch your water supplier?

carrots being washed Image copyright Thinkstock

The only water tariff in England and Wales that has no standing charge is being withdrawn at the end of the month. Most customers will see their bills rise, but why can't they just switch?

Anglian's SOLOW tariff was designed for people with water meters who don't use much water - typically small households. With no standing charge applied, customers only paid for the water they used.

But now 300,000 people in Lincolnshire, Cambridgeshire, Norfolk and Suffolk on the SOLOW tariff will be moved to the company's standard tariff - which does include a standing charge - from 1 April.

It's estimated that two thirds of customers will see their bills rise as a result.

One customer who's very careful with water, Brian Alford, told BBC Radio 4's Money Box that his bills will go up by a quarter in the space of a year. His current bill is £80, and he says the company estimates it rise to £100 next year, and £120 the year after that.

"It's quite an alarming jump," Mr Alford says. "I'm not using any more water and yet my bills have increased incredibly dramatically in one go."

The company is softening the blow by bringing SOLOW customers into line with the standard tariff gradually, so it will be six years before they'll pay the full standing charge - currently £115 a year.

Anglian Water says it's making the change "to ensure fairness to all".

But if customers object to their bills rising, why don't they just switch?

The answer is they can't, because water is provided by regional monopoly suppliers.

Image copyright Thinkstock
Image caption Water in England and Wales is provided by regional monopoly suppliers

The government wants to make switching happen. It's asked the water regulator Ofwat to provide an assessment of the costs and benefits of making switching possible by the summer. It says it will then work with water companies to get household retail competition started by the end of the Parliament - so by 2020.

There might be a real appetite for it, given the Public Accounts Committee reported in January that households have been paying too much for their water supply because Ofwat has been over-estimating their costs and, consequently, price limits.

Switching suppliers?

However some of those in the know think water switching is not going to work. Switching would only bring down the costs of the retail element of your water bill, which covers things like customer support and billing itself. The supply and treatment of your water would stay with the incumbent provider in your area, and that is the main cost.

The Consumer Council for Water reckons that customers will typically be able to save less than £10 by switching. And it might be instructive to look at large non-domestic users of water, like businesses and charities - they can switch, but only four of them have.

Many people struggle to pay their water bill. There is help available in the form of a scheme called WaterSure, which caps your bills. To apply for that, you have to be on benefits and need to use a lot of water either for medical reasons or because your household has three or more school-age children. You also need to be on a water meter.

But you might not be able to afford your bill even if you don't use a lot of water.

Who pays?

In recognition of this, the government came up with the idea of social tariffs in 2010 - special lower tariffs for customers who have trouble affording a normal water bill. And it decided customers in general should pay for this.

The trouble is, customers don't want to pay for social tariffs.

Research by the Consumer Council for Water has shown they support the idea of such schemes but think they should be funded through public expenditure or by the water companies themselves.

This reluctance has translated into low funds for social tariffs.

Before they introduce a social tariff, water companies have to get the agreement of their customers as they are the ones who would be paying for the subsidised customers through higher bills.

They employ researchers to contact a representative sample of customers and survey them online, by phone or face-to-face - putting various scenarios to them such as who should be helped by a social tariff, how much should they be helped and what would that cost other customers.

Customers of three water companies effectively refused: less than half of customers surveyed by Hartlepool Water, Northumbria Water and Bournemouth Water were willing to pay for a social tariff.

Northumbria has set up a social tariff anyway - funding it themselves. The other two haven't, although they are looking at what other options there might be.

Customers of 15 of the 18 companies did agree to fund social tariffs by paying between an extra 50p and £2 per customer per year. Anglian Water was one of them, and Mr Alford will benefit from their new social tariff as he's a pensioner.

But a £2 subsidy is not enough, according to Andy White from the Consumer Council for Water:

"Work which the Consumer Council for Water has undertaken and also independent reviews of the water industry potentially put the scale of the affordability problems in the region of around £400m.

"Our research with customers found that typically they are not willing to pay more than £2 through bills to deliver help. So if that were the case across the industry that might deliver £40m of assistance each year rather than the £400m that some consider to be the true scale of the problem."

And some companies are close to exhausting their social tariff fund, he says, so they'll either have to ask customers if they'll pay more, stump up more money themselves, or place tighter restrictions on who can have a social tariff.

Related Topics

More on this story