Environment Secretary Reviews Ofwat Performance Report

This morning, Ofwat has published its Performance Report on the water sector, announcing that water companies will need to return £114m to customers for underperformance.

Environment Secretary Thérèse Coffey:

Today's Ofwat report is extremely disappointing. While I acknowledge there is good work ongoing in some companies - cleaning up waterways and investing in vital infrastructure - there is simply not enough of it. The fact that not a single water company is classified as 'leading' is unacceptable.

"We have written to the CEOs of every water company in the lowest category of today's report and my ministerial team and I will meet them in person to scrutinise their improvement plans.

Billpayers should know we require the worst performers to return money directly to customers through their bills.

The Government's Plan for Water sets out how more investment, stronger regulation and tougher enforcement will transform the current system. I have been clear if these companies do not make improvements across a range of different measures, we and our regulators will not hesitate to use our powers to enforce it.

We are pushing water companies to go further and have changed the rules on bonuses and dividends to ensure billpayers do not reward pollution - or pay for what should already have been delivered.

Our water and sewerage systems are highly complex and under increasing pressure - but that is no excuse. The public has made it clear that a clean and plentiful water supply is a priority. Government and regulators will be closely securitising upcoming business plans to ensure they deliver the best possible deal for customers, the environment and our future water needs.

Factsheet on government action in the water industry

The Government's Plan for Water sets out how more investment, stronger regulation and tougher enforcement is holding water companies to account and ensuring we have a water sector fit for the future.

More investment

  • As part of the Plan for Water, over £2.2 billion of new, accelerated investment will be directed into vital infrastructure to improve water quality and secure future supplies, with £1.7bn of this being used to tackle storm overflows.
  • All water companies have been asked to provide actions plans for every storm overflow in England which we will publish shortly.
  • We have set stringent targets for water companies to reduce storm overflows - driving the largest infrastructure programme in water company history of £60 billion over 25 years. This includes front-loading action in particularly important and sensitive sites, including bathing waters.
  • In a recent recent High Court ruling on this plan, the Government won on all claims considered by the High Court, meaning the plans were considered lawful by the High Court. The ruling also outlined that the Government's plan goes 'substantially' further than the law to drive a reduction in storm overflow discharges.

Stronger regulation

  • We are driving up monitoring and transparency so the public can see what is going on - we have increased the number of storm overflows monitored across the network from 7% in 2010, to 91% now, and with 100% expected by the end of the year.
  • We are clear water companies must not profit from environmental damage and we have given Ofwat increased powers under the Environment Act 2021 to hold them account for poor performance.
    • On dividends: Using new powers granted to Ofwat by the government, Ofwat is ensuring company dividends are linked to environmental performance.
    • On bonuses for water company executives: Ofwat has outlined a new measure to ensure customers do not fund (via water bills) executive bonus payments where they have not been sufficiently earned through the company's performance.

Tougher enforcement

  • Since 2015, the Environment Agency has concluded 65 prosecutions, securing record fines of over £150 million against water companies. The Environment Agency has also launched the largest criminal investigation into unpermitted water company sewage discharges ever at over 2,200 treatment works.
  • We are also scrapping the cap on civil penalties and significantly broadening their scope to target a much wider range of offences. This is toughening our enforcement tools and expanding where regulators can use them. This will deliver a proportionate punishment for operators that breach their permits and harm our rivers, seas and precious habitats.
  • In 2022, 93% of bathing waters met the highest standards of 'good' or 'excellent', up from just 76% in 2010 and despite stricter standards being introduced in 2015.
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