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Thames Water has repeatedly failed to adequately upgrade and monitor its sewage treatment works since 2017, leading to raw effluent pouring into waterways and risking public health, according to a damning report by the industry regulator.
The utility, which provides water and sewage services to around a quarter of the UK population, has routinely spilled untreated effluent into the environment from most of its storm overflows, Ofwat said, while paying “undeserved dividends” to its shareholders.
The findings came alongside confirmation of a £104.5mn fine for breaking the rules on its waste water operations — the largest penalty that Ofwat has ever issued. Thames Water will also pay an additional £18.2mn fine for paying out millions of pounds in dividends despite the company’s poor performance. Both penalties were consulted on last year.
Ofwat said Thames Water had breached its legal and licence requirements by failing to ensure its sewage treatment works performed “sufficiently . . . so that spills only occur in exceptional or unforeseeable cases”, adding that the utility’s problems were “systemic”.
It said the water company had failed to take action even when it was aware that it could breach legal requirements, and its board had “inadequate oversight” over the problems, which had been occurring since 2017.
The fines, which the regulator announced in August and December last year, will pile pressure on the utility, which is struggling under a £20bn debt mountain and a recently agreed £3bn loan from its creditors to stave off collapse. They are the latest in an onslaught of regulatory and legal action against water companies over the release of raw effluent and storm water into national waterways that has risked public health.
Steve Reed, the environment secretary, said on Wednesday that the government had announced a record 81 criminal investigations into water companies last week, amounting to the “toughest crackdown” on the sector in history.
In addition to Ofwat’s probes, the environment agency has 393 open investigations, including criminal investigations into sewage works, a National Audit Office report said last month.
Ofwat chief executive David Black on Wednesday gave Thames Water six months to agree remediation plans, adding it was a “clear cut case where Thames water has let down its customers and failed to protect the environment”.
Thames Water said it needed to “assess the cost and timing of the capital investment required” for those plans. “We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows,” the company added.
The findings are the latest controversy for Thames Water, which agreed this month to pause executives’ lavish retention payments negotiated as part of the £3bn emergency loan from its senior creditors following a government backlash.
The privatised utility came perilously close to running out of money before it agreed the £3bn loan earlier this year. It is now in negotiations with the private equity firm KKR to take over the business, after its pension and sovereign wealth fund owners walked away last year and declared the business uninvestable.
Cat Hobbs, director of We Own It, which campaigns for renationalisation, called for the environment secretary to bring the company under state control. “The environment secretary has the power to stop this madness. He can put Thames Water into special administration, slash most of the rotten debt and then transfer it to full public ownership,” she said.
Thames Water said: “Our lenders continue to support our liquidity position and our equity raise process continues.”
