Water companies regularly top lists of customer dissatisfaction, with many people criticising them for poor performance, leaks, and high prices.
The industry regulator, Ofwat, said the move was designed to “start the firing gun on the transformation of the water industry.”
How does the plan work?
Under Ofwat’s plan, which will come into force in April 2020, companies will have to reduce bills by 12 per cent before inflation - around £50 per year for the average household.
But the regulator’s plan doesn’t stop with a reduction in bills. Ofwat is challenging water companies to reduce supply interruptions by 64 per cent, leakages by 17 per cent, and pollution incidents by 34 per cent.
The industry will also be tasked with improving the condition of more than 12,000km of waterways like streams and rivers.
A welcome change?
Speaking to the Today programme, Ofwat’s chief executive, Rachel Fletcher, conceded that many firms would be unhappy with the plans.
"We've said all along this was going to be a tough review," she said.
"We think this is the greenest package ever for water companies."
The Consumer Council for Water (CCWater) welcomed the announcement, but said that the changes should go even further.
The watchdog agreed that the average household bill will fall by about £50 before inflation is added, but warned customers to expect “significant regional variations”.
Tony Smith, Chief Executive of the Consumer Council for Water, said, “Most customers will see this as a good deal but more must be done to make sure everyone can afford their bill and ensure there is sufficient investment in safeguarding these essential services long into the future.
“Water companies have had it too good for too long. At first glance in appears Ofwat has listened to our repeated calls for it to get tougher and tip the balance back in favour of customers.
“But we’ll be keeping a close eye on the performance of companies to make sure customers are not short-changed.”