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

Water companies will charge households more if they consume above a recommended annual ration for washing, cooking, cleaning and gardening.

People using high levels would have to pay an extra 160 per cent – rising from £1.50 per 1,000 liters to £4 – while those who are careful can save.

In a related measure, customers could pay more in the summer, when supplies are scarce, to avoid overconsumption.

Individual households may qualify for discounts if they have a rain barrel in the yard to water plants or install permeable parking on their property, rather than a conventional hard surface.

The schemes are being promoted by industry regulator Ofwat, which says it wants water companies to be “more creative” in setting tariffs to “help customers use water wisely.”

Affinity Water, which supplies water to 3.8 million people in the Southeast, will be the first to test differential pricing for 1,500 customers this year.

Under the program, customers receive the first 30,000 liters of water they use for free, which is equivalent to about two months’ supply of water for a four-person household.

The next 250,000 liters will be charged at £1.50 per 1,000 litres, while any household using more than 250,000 liters will be charged at £4 per 1,000 liters – a 166 per cent increase.

The median consumption for its customers is 111,000 liters per year and Affinity believes that at least two in three would pay less. However, a household that consumes 300,000 liters sees the annual accounts increase by about a third and someone that consumes 475,000 liters pays double.

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

Secretary General of the National Convention for Retirees, Jan Shortt, said: ‘This proposal by Ofwat for the water companies to be “creative” with charges sounds quite complicated.

“We need more details, but it seems like everyone has the same lifestyle and needs.

‘Older people have a very different lifestyle than working and healthy people. People 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, any other scheme that allows water companies to make more profit from customers makes no sense.

“Maybe they should spend more of their profits on preventing sewage from leaking and causing environmental damage, let alone addressing the leaky supply lines that drive up costs for every user.”

Experts from the New Economics Foundation believe that this new way of charging for water also has benefits for low-income households – with low consumption – and proposed to extend it to gas and electricity.

Her expert on the subject, Chaitanya Kumar, said it is possible to set water usage thresholds so that most people would benefit from lower bills, while only a small group of very high usage households would pay more.

He said: ‘We have significant data that allows us to establish fairly good thresholds for households above which higher rates take effect. It doesn’t have to result in a babysitting state telling us how much to ration.”

David Black, CEO of Ofwat, stressed that the new differential charge is good for consumers and urged other water companies to follow Affinity’s lead.

He also clarified that a key objective of the scheme is to reduce water consumption, saying: ‘Water resources are affected by climate change, which poses significant long-term challenges to the health of river water and security of water supply.

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

‘We want more companies to find and implement innovative solutions.’ Affinity customer research shows that ‘just over half’ believe this is a fairer way to pay for water.

James Tipler, Head of Financial Support and Service Delivery for Affinity Water, said: ‘We want to be affordable and fair for all our 3.8 million customers in 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 rate in this way, we hope to see evidence that water bills are becoming more affordable for more of our customers. We estimate that at least two out of three households will pay less if consumption remains the same.’