The UK government and regulators are failing to adequately oversee the privatized water sector, with companies prioritizing financial returns at the expense of “much-needed” infrastructure investment, a parliamentary report says.
The lax oversight system has allowed utilities to remain “over-focused on maximizing financial return at the expense of the environment, operational performance and financial sustainability”. House of Lords Industry and Regulatory Committee he said on Wednesday.
Evidence gathered during the expert inquiry revealed “general shock, anguish and anger among respondents at the state of our waterways and the apparent failure to deal with the problem”, said committee chairman Lord Clive Hollick.
The report said the government and regulator needed to do more to hold industry to account for pollution and that executives should not be entitled to “significant bonuses” if their companies fail to meet key performance targets. The waterfront was privatized in 1989.
Ministers should also give regulator Ofwat the power to ban directors of companies responsible for “serious pollution” from continuing to work in the sector, the report suggests.
Public outcry over the poor condition of the country’s waterways is growing. Last year’s rough report by MPs revealed that only 14 percent of rivers in England were rated as having a ‘good’ ecological status.
The Environment Agency, another regulator accused of failing to act effectively on polluters, last year found water companies’ environmental performance to be at an all-time low.
The committee called on the government to ensure the agency is “adequately funded” to investigate, prosecute and sanction water companies for pollution.
The wide-ranging report found that the level of investment did not match the growing demand for water and wastewater services, and infrastructure maintenance and modernization. The network is now “not able to cope”, it said, as it urged the government to clarify how Ofwat needs to balance the need to keep short-term bills low while providing enough investment to ensure long-term provision.
He called on ministers to develop a national water strategy that covers both water quality and security of supply and sets clear targets for regulators. The report also said the government should introduce a “single social tariff” to protect vulnerable consumers who cannot afford their water bills.
Ofwat said this week it would acquire it new powers prevent companies from paying dividends if they fail to meet consumer and environmental performance targets. To ensure that water companies meet their legal obligations, including maintaining sewers, Ofwat regulates how much water companies can charge customers.
Ofwa called the report “helpful and detailed” and said many of the areas it identified were “work in progress”.
“The commission called us to allow companies to invest more money in the network. We agree that more spending is needed. At the same time, we note that in the last two years, 14 of the 17 water companies did not spend the funds received for investment in the network, and some of them spent less than half,” added the regulator.
Water UK, the industry trade body, said the committee was “right to encourage a more holistic approach to improving water quality, involving industry, government and regulators”.
He added: “We welcome the committee’s clear recommendation that the Government provide guidance to Ofwat on the increased level of investment needed to further improve the environment and water safety.”
The Department for the Environment Food and Rural Affairs said the Government knew more needed to be done and “we will move further and faster to hold companies to account for delivering for customers and our environment”.