Key questions: why Thames Water wants £29 more from you

How much more will Thames Water customers have to pay and when?

If Thames Water‘s application to regulator Ofwat is successful the £29 charge will apply from next year – although the company has asked if it can spread the cost over more than one year to avoid a spike in bills. A spokesman for the company, which is ultimately controlled by Australia’s Macquarie Group, said: “We have had a tough time financially as a company because of increased costs.”

Why the extra charge? Bad debt or tunnels?

There are a number of reasons Thames Water wants your £29. The company says the biggest reason is a necessary £273m spent on acquiring land for the construction of the Thames Tideway Tunnel, a major new sewer development. Thames Water would rather buy the land now than later because, as the firm’s Richard Aylard said earlier, of the “very expensive land in London”. Also on the price list is the cost of operating private sewers transferred to Thames Water by the government in 2011. But your cash would also make amends for other customers who have failed to pay their bills. A breakdown of the £29 surcharge shows that £16 of it is accounted for by increases in bad debt – fuelled, of course, by the economic downturn.

But Thames Water made profits last year – can’t they pay for it themselves?

On the face of it, Thames Water’s finances have been flowing nicely. The firm’s revenues rose to £1.8bn in the last financial year, and it later emerged the company paid no corporation tax. Meanwhile Thames’s bills rose by an inflation-busting 6.7 per cent.

But actually there was a 20 per cent downward trickle for the firm – with pre-tax profits dropping by a fifth to £144.9m in the year to the end of March. Much of Thames’s income was spent on servicing huge debts, with interest payments of over £400m over the year as borrowings increased from £7.8bn to £8.4bn. And Thames Water says it is already absorbing much of the extra outlay, which also includes increased Environment Agency charges.

Thames Water’s boss got a pay rise and a bonus – are we paying for his perks?

It’s true that despite that drop in profits, Chief Executive Martin Baggs saw his basic pay rise to £450,000 – he also bagged a bonus of £274,000. But Thames, which serves 14 million customers, says its average bill is £354 – still among the lowest in the country, even with the extra charge. Ofwat figures support this – with only Severn Trent charging less, on average.

So when does Ofwat decide?

Ofwat says it will challenge the proposals and “question the company strongly” on the reasons behind it. The regulator will announce its decision by November.

What else does £29 get me?

If Ofwat decides not to allow the extra charge you may be able to treat yourself to a pair of Converse trainers, a bottle of Moet champagne – or a My Little Pony Royal Wedding Castle playset.