As the uncharted waters of the regulatory landscape shift with PR24, businesses need to understand that the true cost of these changes will be far greater than the headline figures suggest.
The average percentage increase, while striking, doesn’t capture the real financial burden on large businesses. At Waterscan, we’ve spent the past month analysing the PR24 final determination (FD) to better understand how our customers—particularly those in the self-supply community and other large users—will be affected.
The headline numbers, such as the average 36% increase in household bills over the next five years, paint an incomplete picture. While these figures may seem manageable at first glance, they fail to fully convey the actual impact on businesses, particularly in the first year when prices will rise much more sharply than the overall average suggests.
Front-loading and inflation: The unseen costs
The first and most significant issue that businesses need to recognise is the front-loading of price increases. Ofwat’s documents discuss an average 36% increase over five years, but this statistic obscures the reality that the first year alone will see an average 20% price rise. With inflation also excluded from these quoted numbers, the real cost is far more significant. In practice, businesses may be facing increases of 50% or more, depending on their consumption levels and tariffs.
We’ve also seen that in some cases, the cumulative effect of inflation will push the overall increase to as much as 53%, and for some businesses, particularly those in high-cost regions, price rises could reach up to 100% by the time all factors are taken into account. The financial strain of these increases cannot be overstated.
As Neil Pendle, CEO of Waterscan, explains: “The headline numbers provided by Ofwat simply do not reflect the true financial burden that businesses will face. The price rises are more front-loaded than most realise, and the lack of clarity around inflation and tariff changes will hit businesses hard. Delaying decisions, such as retendering water contracts, could cost companies hundreds of thousands in unanticipated additional costs.”
The disconnect between real and reported price increases
While the PR24 documents focus primarily on average increases in household bills, the reality for businesses is very different. Water companies have applied tariff changes across varying consumption levels, meaning that large users will face much higher price hikes than the average 36% increase that Ofwat reports.
For example, in some regions, businesses may see tariff increases between 40% and 54% for water supply and waste costs. This isn’t just an incremental rise—it’s a significant cost shift, with some businesses likely to see their water bills nearly double.
The pricing structure changes don’t stop there. Many water companies are moving away from the falling block tariff system, which historically benefited high-consumption businesses. This shift will disproportionately affect larger users, compounding the already steep price rises. It’s an industry trend that has been building for years but is now reaching its tipping point.
The real cost of delaying retendering
One of the most pressing issues we’re seeing is that many businesses are delaying retendering their water contracts in response to PR24. Unfortunately, this delay can be incredibly costly. As tariffs rise, businesses that have not already retendered their contracts could find themselves locked into unfavourable deals that reflect outdated pricing models.
With price increases front-loaded, companies that are slow to act will face higher costs than necessary. This delay could result in businesses spending hundreds of thousands more than if they had proactively renegotiated or retendered their contracts ahead of the impending price hikes. The financial impact will be felt immediately, and the longer businesses wait, the more they stand to lose.
The urgency for transparency and action
What businesses need now is transparency and clarity. Waterscan has worked to provide our customers with the most accurate information possible, so they can make informed decisions about how to manage these price increases. The lack of clear communication from Ofwat and the water companies regarding tariff changes, inflation adjustments, and price front-loading only adds to the complexity.
This is a critical moment for businesses to act. Understanding the full impact of PR24 is essential for ensuring that you can manage costs effectively and avoid the financial pitfalls that are emerging in the wake of these regulatory changes.
A call to action for businesses
We strongly advise businesses to take action now to understand how PR24 will impact their water costs. Delaying retendering or contract renegotiations could result in significant financial losses. Instead, businesses should take advantage of the current window to renegotiate contracts, explore alternative water sources, and implement more efficient water management practices.
This is an opportunity for businesses to look beyond the immediate price hikes and embrace innovation in water management. By adopting smarter water solutions, businesses can mitigate the impact of these price rises and build resilience for the future.
As Neil Pendle concludes:
“The business fundamentals around water efficiency have materially changed. Investing in innovative water management now will not only help companies reduce their exposure to rising costs but also provide opportunities for long-term sustainability and growth.”
Conclusion
The PR24 price increases will have a far more significant impact on businesses than many are prepared for. The actual cost of these changes will be felt most acutely by those who are slow to act, particularly when it comes to retendering and adjusting water usage strategies. Businesses must be proactive, transparent, and strategic in their response to these regulatory changes.
Waterscan is here to help businesses navigate this complex landscape, ensuring they can manage rising costs while also driving innovation in water efficiency. The sooner businesses act, the better they will be positioned to manage the impact of PR24 and thrive in a changing market.
This article appeared in the May 2025 issue of Energy Manager magazine. Subscribe here.