Londoners face higher water bills to help pay for pandemic-related delays to the £4.1bn “super sewer” being built under the Thames.
The Financial Times reported that developer Thames Tideway wants to increase the levy it is charging households for the project from £18 per year to £20-£25 per year. Thames Tideway was set up by London’s water supplier Thames Water to build and develop the tunnel, rather than having it on its own balance sheet. It is owned by infrastructure investors Allianz, Amber Infrastructure, Dalmore Capital and DIF Capital Partners. The super-sewer’s owners committed £1.2bn at the start of the project in 2015- £509.7m in equity and £765.4m in shareholder loans. They have so far received £193.2m in interest on their loans as well as £54.5m in capital ¬repayments.
The 15.5 mile tunnel will run from Acton in west London to Mill Meads, in east London, with the aim of stopping sewage leaking into the Thames. The project has been delayed by nine months, and costs have risen by £233, it is now set to be handed over to Thames Water in 2025. The development started in 2016 but was paused for six to eight weeks as the pandemic took hold, and other measures have been introduced to keep workers safe. The water regulator, Ofwat, will need to approve any increase in bills.
In its annual report, Thames Tideway’s chairman Sir Neville Simms said: “At the time of writing there remains uncertainty regarding both the short and the longer term financial impact of the pandemic.”
Thames Tideway is allowed to recoup costs from customers’ bills during the construction via a financing mechanism known as regulated asset base. Ministers are considering the same mechanism to help fund the construction of the proposed Sizewell C nuclear power station in Suffolk, and is negotiations with EDF over the nuclear plant. Supporters back the mechanism as it can help reduce overall costs by bringing down risk for customers, although critics say it unfairly heaps risk onto consumers.