Water regulator Ofwat has been mocked after reports suggested fines could be reduced for polluting water companies to help them avoid financial collapse.
According to Financial Times.
Campaigners have criticized the proposals, arguing that lighter sentences “send a dangerous message that companies can get away with pollution”.
Some of England’s water companies are struggling with huge debt burdens, notably Thames Water, whose parent company, Kemble, is saddled with £16bn of debt and recently defaulted on a £400m loan.
At the same time, firms are under pressure to increase investment in their infrastructure due to public anger over the huge volumes of raw sewage being dumped into England’s rivers, seas and lakes.
A number of firms have asked Ofwat to allow them to increase bills by significant amounts to cover these costs. Thames Water has sought to increase bills by 59 per cent to £749 a year, while Southern Water has sought to increase bills by 91 per cent to £915.
Ofwat was due to make an initial decision on these proposals on Wednesday 12 June, but this has now been postponed until after the election.
While Ofwat is thought to be on the verge of pulling back from any major rise in consumer bills, it appears the regulator may now be considering reduced fines for struggling firms as an alternative.
According to Financial Timesstruggling water firms can be put into a “recovery regime” by the regulator, which can see them avoid fines and be given easier targets for sewage spills, water leaks and outages.
The proposal could first be applied to Thames Water, as part of a move to avoid nationalization as the firm faces financial difficulties. However, other firms struggling with their own finances, such as Southern Water, South East Water and Yorkshire Water, may be eligible.
Such a move could appease shareholders, who have argued that a tightening regulatory regime is making water companies uninvestable.
Questions remain as to whether the regime will become a reality.
Shadow Environment Secretary Steve Reed said the plans would not happen “with a Labor government”. He said: “Labour will put water companies under special tough measures. We will freeze the rewards of law-breaking bosses until they clean up their mess.”
Environmentalists have criticized the proposals, arguing that it would absolve water companies of decades of underinvestment and pollution.
“The idea that Ofwat would reduce water company fines while they continue to systematically break the law by illegally polluting our rivers, lakes and seas is beyond outrageous,” said Charles Watson, founder and chairman of the campaign group. River Action.
He said the fines are already “so pathetically small”, adding that fines imposed on water companies last year equated to roughly one per cent of the amount paid out to shareholders in dividends.
Nick Measham, chief executive of WildFish, said water companies “have persisted in breaking the law” and that Ofwat’s proposals would “let them off the hook again”.
“How out of touch do you have to be to reduce the fines for the water companies that have ruined our rivers and seas, after such a public outcry?” added Kierra Box, campaigner at Friends of the Earth.
Ali Morse, water policy manager for The Wildlife Trust, also criticized the proposals and said water companies “need to invest upfront to rapidly reduce wastewater discharges so that fines are not needed at the end”.
She said “greater use of nature-based solutions”, such as creating wetlands to capture rainwater and avoid overwhelming sewage, could help firms “meet environmental demands in a more cost-effective way”.
The timing of the election means it may be up to Labor to work with Ofwat to decide what to do about Thames Water and the wider water industry.
If the party wins the election, the future of Thames Water could be one of the party’s first major challenges in government.
There is widespread public support for the nationalization of the water firm, but Labor leader Sir Keir Starmer has backed away from plans to take public ownership of struggling water companies.
Ofwat declined to comment.