Water companies could charge households more if they use above an annual ration

Water companies are set to charge households more if they use above a recommended annual ration for washing, cooking, cleaning and looking after the garden.

People who use high levels would be charged an extra 160 per cent – going up from £1.50 per 1,000 litres to £4 – while those who are careful could make savings.

In a related measure, customers could be charged more in the summer, when supplies are scarce, to stop them from using too much.

Separately households might qualify for discounts if they have a water butt in the garden to keep plants watered or install permeable parking on their property, rather than conventional hard standing.

The schemes are being promoted by the industry regulator Ofwat which says it wants water companies to be more ‘creative’ in how they set charges to ‘help encourage customers to use water wisely’.

Affinity Water, which supplies water to 3.8million people across the South East, will be the first to run trials of differential pricing for 1,500 customers this year.

Under its scheme, customers will get the first 30,000 litres of water they use for free, which equates to around two months’ supply for a four-person household.

The next 250,000 litres will be charged at £1.50 per 1,000 litres, while any household using over 250,000 litres will be charged at £4 per 1,000 litres – a rise of 166 per cent.

The median usage for its customers is 111,000 litres per year and Affinity believes that at least two in three would pay less. However, a household using 300,000 litres would see the annual bill rise by about one third and someone using 475,000 litres would pay double.

The system is known as a rising block tariff (RBT) and has been used in some other countries to conserve water, including Australia, Spain, the US and Portugal, as well as parts of Asia and South America.

General Secretary of the National Pensioners’ Convention, Jan Shortt, said: ‘This proposal from Ofwat to the water companies to be “creative” with charging sounds quite complicated.

‘We need more detail, but it appears to treat everybody as having the same lifestyle and needs.

‘Older people have a different lifestyle altogether to those working and in good health. Those who are disabled or ill, often need access to water at different times of the day for their health treatment.’

She added: ‘To be honest, another scheme which enables water companies to make more profit out of customers does not make sense.

‘Perhaps they should spend more of their profit ensuring sewage doesn’t leak and cause environmental damage, never mind dealing with the leaking supply pipes which puts the cost up for every user.’

Experts at the New Economics Foundation believe this new way of charging for water also has benefits for low income households – with low use – and suggested it could be extended to gas and electricity.

Its expert in this area, Chaitanya Kumar, said it is possible to set thresholds for water use in such a way that most people benefit from lower bills, while only a small group of households with very high usage would pay more.

He said: ‘We have considerable data to allow us to set fairly good thresholds for households beyond which higher tariffs kick in. It doesn’t have to result in a nanny state telling us how much to ration.’

Ofwat chief executive, David Black, insisted the new differential charging is good for consumers and urged other water companies to follow the example set by Affinity.

He also made clear that a key aim of the scheme is to reduce water use, saying: ‘Water resources are being impacted by climate change which poses significant long-term challenges to river water health and security of water supply.

‘While charging is only one approach, companies need to use every tool at their disposal to support affordability, encourage us all to use water wisely and reduce our impact on the environment.

‘We want to see more companies seeking out and implementing innovative solutions.’ Affinity claims customer research found ‘just over half’ believe this would be a fairer way to pay for water.

The company’s Head of Financial Support and Service Delivery for Affinity Water, James Tipler, said: ‘We want to be affordable and fair to all our 3.8 million customers across the South East of England. We want to obtain evidence on the impact of the tariff trial on affordability for our customers by comparing our trial and control groups.

‘By structuring the tariff in this way, we hope to see evidence that water bills become more affordable for more of our customers. We have estimated that at least two out of three households will pay less if usage remains unchanged.’