Ian Byatt, director general of Ofwat, said that new customers are subsidising existing ones and are paying too much for the cost of meeting growth in demand for water and sewerage services.
Mr Byatt is also worried about the variation in connection charges across the country, which he believes cannot be justified. A new customer in Eastbourne, served by South West Water, pays pounds 1,154. In nearby Hastings, served by Southern Water, the charge is pounds 394.
Ofwat raised its concerns in a consultative document on paying for growth in the water industry. Mr Byatt also wants companies to ensure that spending on better services or increased supplies is justified. It is not always clear that customers want the improvements enough to foot the bill, he said.
Companies should consider whether compulsory metering of homes would lead to lower bills rather than spending on new resources such as reservoirs.
A quarter of the increase in water and sewerage bills over the next few years will be needed to finance growth, according to Ofwat. This means the average household will be paying about pounds 10 a year to meet the cost of development. Mr Byatt said that these costs must be carefully balanced in terms of the effect on the environment as well as on people's willingness to pay.
Ofwat has asked for responses to the report by 30 April. The evidence will be used as part of a review of price caps.Reuse content