Water companies will be forced to return money that isn’t spent on upgrading their sewerage networks to customers under new plans being unveiled by the Government, i can reveal.
Lucie Heath, Richard Vaughan inews.co.uk
In his first intervention on Britain’s sewage crisis, Environment Secretary Steve Reed said water companies will no longer be allowed to divert infrastructure funding to pay for bonuses, dividends or salary increases.
It comes ahead of a draft decision by the regulator Ofwat on Thursday over how much it will allow bills to increase to tackle to sewage crisis. Firms have proposed bill increases of up to 72.87 per cent, meaning some customers could be paying up to £726.64 on their annual water bill by 2030.
Mr Reed also revealed plans to double the compensation households receive when their water supply is disrupted and to set up new panels for customers to hold the utility firms to account.
“We will never look the other way while water companies pump sewage into our rivers, lakes and seas,” he said.
“This unacceptable destruction of our waterways should never have been allowed, but change has now begun so it can never happen again.”
Water companies are already forced to return money to customers if they fail to meet separate targets linked to environmental performance and leakages. This is done via deductions to bills in the following year, rather than cash back.
It is understood that it will be up to regulator Ofwat to decide how exactly customers will be refunded if water companies do not spend their allocated infrastructure funding. Ofwat is the sector’s independent economic regulator but takes policy direction from ministers within the Department for Environment, Food and Rural Affairs.
Campaigners are likely to welcome the early intervention from Labour during the party’s first week in power.
However, it remains unclear when the new Government plans to set in motion some of the other proposals in its manifesto to clean up the UK’s waterways, including prosecutions for water bosses and automatic fines for firms.
Labour is also yet to commit to all the policies outlined in i’s manifesto to Save Britain’s Rivers and waterways, including increased funding for the Environment Agency and for farmers so they can reduce agricultural pollution, plus a “green duty” on regulator Ofwat to place greater emphasis on the environment when making decisions over water companies’ business plans.
Tomorrow afternoon, Mr Reed will hold a meeting with water company chief executives to set out his plans for the sector, which has faced intense scrutiny for the dumping of sewage into Britain’s rivers.
The meeting will take place on the same day that the Ofwat, publishes its highly-anticipated decision on water companies’ business plans for the next five years.
The draft decision will set out how much water companies will be allowed to increase customer bills by to pay for the upgrades needed to reduce sewage pollution.
Firms have proposed bill hikes between 13.6 and 72.87 per cent over the five-year period, meaning households would be paying up to £726.64 per year for water by 2030.
Ofwat is expected to allow water firms to increase bills, and only by slightly less than they are demanding.
Mr Reed has outlined four policies the Government would introduce “to clean up the water industry to cut sewage pollution, protect customers and attract investment to upgrade its crumbling infrastructure”.
This includes plans to write to Ofwat to ask them to make sure funding for infrastructure investment is ring fenced and cannot be spent on bonuses, dividends or salary increases. This will include infrastructure investments to prevent sewage spills, among other things.
Any promised infrastructure funding that is not spent on upgrades should be refunded to customers, he said.
Last year, 11 of the 16 water companies in England and Wales were forced to give money back to customers. However, water bills have continued to rise despite firms being penalised, for example in the 2023/4 financial year, bills increased by an average of 7.5 per cent despite water companies being penalised for missing targets.
Water companies have been heavily criticised in the past for failing to spend money on their infrastructure, while paying large dividends to their investors.
In its most recent performance report for the sector, Ofwat found water companies had failed to spend £587m set aside for improving their assets between 2020 to 2023.
Meanwhile, water companies in England paid £2.5bn in dividends in the two financial years since 2021, analysis by the Financial Times found.
Alongside restricting infrastructure spending, the Government will consult on doubling the amount of compensation customers will receive when their basic water services are affected. Depending on the circumstances, customers are typically entitled to £20 in compensation if their water supply is disrupted for 24 hours, followed by £10 for each additional day.
Ministers will also look to expand the circumstances under which customers receive compensation to include ‘Boil Water Notices’, which are issued when there are contamination concerns over drinking water in a region.
The move is likely in response to the recent parasite outbreak in Devon that saw over 100 people reporting a diarrhoea-type illness and around 16,000 homes and businesses being ordered to boil their water, with some homes affected for almost two months. South West Water was forced to pay out around £3.5million to affected customers.
Mr Reed will also order water companies to change their governing rules to make the interests of customers and the environment a primary objective.
New customer panels will be introduced with the power to summon board members and hold water executives to account, the Secretary of State said.
However, Mr Reed stressed that change will “take time” to improve Britain’s waterways and said the Government will outline further steps over “the coming weeks and months”.
It’s currently unclear when Labour will set in motion the other policies in its manifesto, including bringing criminal charges against water executives that break the law and introducing automatic and severe fines for polluting firms.
It is possible that more detail will be provided in the King’s Speech, which is scheduled for next week.
While Labour’s proposals are likely to be welcomed by campaigners, the Government is yet to commit to some of the other changes groups have been calling for to end the sewage crisis and restore our waterways.
East Devon Watch 