Thames Water says new reservoir may cost triple its original budget

Thames Water has said a new reservoir in Oxfordshire could cost more than three times the original budget, pushing the cost to be covered by water bill payers to as much as £7.5bn.

- Phillip Inman

In a blow to government plans to expand the number of reservoirs across south-east England, the heavily indebted utility said a review of the Abingdon project had sent the estimated cost of construction from £2.2bn to between £5.5bn and £7.5bn.

Only last year, Thames told the Department for Environment, Food and Rural Affairs (Defra) its assessment of likely costs was "robust". But it has now told regulators that more tests had shown the final bill would be more than twice, possibly three times, the current forecast.

If the reservoir goes ahead, about half the costs would be recovered from Thames Water's 16 million customers in London and the south-east, with Affinity Water and Southern Water customers sharing the rest.

Thames customers already face a 35% rise in bills over five years under a settlement by the regulator Ofwat, while those at Affinity face a 26% increase and at Southern 53%.