OFWAT’s threat to prevent water company dividends doesn’t go far enough

OFWAT’s announcement that it will assume new powers to stop water companies from paying dividends to its shareholders does not go far enough to ensure action to protect the environment is a priority. 

Against a backdrop of every river in England failing its water quality targets and too many rivers being treated as open sewers, the need for firmer actions from the water regulator is long overdue.

While the OFWAT will take action to ‘require companies to hold a strong credit rating and to stop them paying dividends if their financial health is at risk’, when it comes to protecting our rivers they are merely asking water companies to “take account of … the environment” when considering dividend payments.

Stuart Singleton-White, Head of Campaigns at the Angling Trust, said:

“OFWAT have grabbed the headlines with their move to prevent dividend payments at a time when there is a great amount of public interest in the health of our rivers and the protection of wildlife.  But once again they have shown that when it comes to the environment, holding water companies to account is optional.

“We need to get serious about ensuring water companies do more to protect our rivers.  It is too easy for them to continue to get away with polluting those rivers and to fail to invest in both the infrastructure and nature-based solutions to prevent future damage.  This should be the top of the agenda in every water company board room.  They need to feel the heat from OFWAT breathing down their necks.”

Our rivers have suffered the poor performance of OFWAT over decades in failing to require adequate investment in our woefully inadequate water infrastructure, including the replacement of leaking pipes and rising sewer mains and the scandalous lack of any new reservoir building since privatisation in 1989. These failings, along with those of water companies themselves and the Environment Agency, have been highlighted in the damming report from the House of Lords Industry and Regulation Committee into water industry regulations.

Both OFWAT and Defra need to do a lot more to hold water companies to account, something the Angling Trust highlighted in the ‘Time to Fix the Broken Water Sector’ report published in September, 2021.

Among its finding the House of Lords committee found that;

• water companies have been overly focused on maximising financial returns at the expense of the environment, operational performance, and financial sustainability; and
• water company bosses should not be able to receive substantial bonuses while their companies have missed performance targets and polluted the water environment.

Among their recommendations, the committee suggests the government should:

• give Ofwat guidance on how it should handle the trade-off between balancing the financial needs of customers during a cost-of-living crisis with the urgent need for infrastructure and environmental investment; and
• give Ofwat powers to prevent directors of companies that are responsible for serious pollution incidents from continuing to work in the sector, providing individual accountability.

The recommendations from the House of Lords committee should be adopted as a matter of urgency by OFWAT and Defra if they are serious about cleaning up our rivers and holding water companies and their director to account.

Martin Salter, Head of Policy at the Angling Trust, said:

“It’s good see the House of Lords weighing into the debate on sewage pollution and the pathetically inadequate regulation of the failing water industry. We are pleased that they are joining the angling community in shining a light on the poor performance of OFWAT.

“OFWAT have deliberately choked off much needed investment in replacing leaking pipes and rising sewer mains and increasing capacity at sewage treatment works. They in part are responsible for the scandalous lack of any new reservoir building since privatisation in 1989 which is resulting in many of our precious chalk streams and other rivers literally being sucked dry.

“We need to see OFWAT doing more than simply requiring water companies to ‘take account’ of the environment.  The health of our freshwater environment is as important as the financial health of any water company.”

Links:

Summary of the House of Lords report and recommendations

‘Time to Fix the Broken Water Sectror’ report