Labour launches crackdown on water companies
Households are to get higher compensation for sewage failures and the power to hold executives to account as the Government launches a crackdown on the water industry.
Steve Reed, the Environment Secretary, is to tell bosses they must set up customer panels that can scrutinise mistakes, and demand they strengthen their legal commitments to protect the environment.
It comes as regulator Ofwat prepares to rule on whether companies can increase customer bills by as much as £300 per year, as the industry seeks to steady its finances and invest in upgrading infrastructure.
Ofwat’s decision will be announced on Thursday morning. Mr Reed will then meet executives in Whitehall to lay out his plans.
The amount of compensation to be paid to customers for water outages and other problems will be doubled to around £50 under the proposals. The trigger for compensation will also be widened to include so-called “boil notices” when water is unsafe to drink.
New “customer panels” will be rolled out to help bill payers hold company bosses to account, and companies will be forced to change their articles of association to make the interests of customers and the environment a primary objective.
Mr Reed said: “We will never look the other way while water companies pump sewage into our rivers, lakes and seas.
“This unacceptable destruction of our waterways should never have been allowed, but change has now begun so it can never happen again.
“Today I have announced significant steps to clean up the water industry, to cut sewage pollution, protect customers and attract investment to upgrade its crumbling infrastructure.
“That change will take time. Over the coming weeks and months, this government will outline further steps to reform the water sector and restore our rivers, lakes and seas to good health.”
It comes as Ofwat prepares to deliver a draft verdict on business plans put forward by Britain’s 16 water companies, all of which are seeking to increase bills between 2025 and 2030.
On average, annual bills could rise by a third under proposals submitted by suppliers, soaring from £440 to £584 a year. Ofwat could accept the proposals, or only allow companies to increase prices by a smaller amount.
Southern Water, which supplies customers in Hampshire, Sussex and Kent, is proposing the steepest increase with a rise of 73pc.
If approved, this would increase annual bills from £420 to £726, leaving Southern with the highest bills in the country.
Southern Water is majority-owned by Macquarie, Australian investment bank, which has come under fire for its previous role running Thames Water.
It has said bills must go up to fund new investment amid problems linked to water scarcity and climate change.
The regulator’s draft determination sets limits on how much companies can charge customers, which impacts their investment between 2025 and 2030.
Water companies say they need to increase bills in order to spend £100bn in upgrading leaky pipes and crumbling sewers.
Thames Water, Britain’s largest water company with 16 million customers, wants bills to rise by 44pc to £627 per year.
The embattled company is facing a funding crisis with only enough cash to keep it going until May 2025.
Without an increase in bills to make it “investable”, Thames said it could run out of money and face a special administration under the new Labour government.
South Staffs Water, which supplies drinking water to 1.3 million in the West Midlands and South Staffordshire, is proposing the lowest increase of 12.5pc. Bills would reach £181 per year under the proposal.
Labour is attempting to avoid the collapse of Thames in a crucial early test of its competence.
Ofwat’s decision on Thursday is a preliminary ruling with a final verdict due in December before the bill rises take effect in April 2025.
Water companies unhappy with the outcome can pursue a legal challenge at the Competition and Markets Authority, further prolonging the process.