UK needs new regulations to fix broken water industry, review says
The Labour government ordered a review of the privatised water industry in England and Wales after record sewage spills in rivers and lakes sparked widespread anger.
The sector's biggest company, Thames Water, is battling to avoid collapse under its debt pile, and has said it is likely to face 1.4 billion pounds in pollution fines and penalties over the next five years.
Former Bank of England Deputy Governor Jon Cunliffe, who led the review, said the current, separate financial and environmental regulation of the sector had failed, and financial regulator Ofwat should be replaced.
The review considered the creation of a new regulatory system where water companies can raise enough money through bills to rebuild their assets, investors can get long-term, steady returns, and the impact on the environment can start to improve.
"Fully joined-up regulation is essential for the system to meet the demands of the future and ensure that private water companies act in the public as well as the private interest," the report said.
Britain's water infrastructure needs more than 100 billion pounds ($134.18 billion) of investment in the next five years to cope with population growth and climate change, with consumers set to face bill rises of an average 36% over the period.
Investors were waiting for the report for signs of how the government could reset the regulation for Thames Water, which has been fighting for survival for the last 18 months, if it is to avoid being temporarily nationalised.
Environment Minister Steve Reed, who on Sunday promised to halve sewage pollution by 2030, is due to announce "root and branch" reform of the sector's regulation in a speech later on Monday, his office said.
Under Cunliffe's recommendations, the new single regulator would set "minimum capital" requirements for investors and it would also be able to block changes in water ownership if they were not deemed to be in the long-term interests of the company.
In order to attract investment, the report said the government should offer the regulator direction to support stability and predictability - a reference to expected returns, and potential handling of fines for sewage leaks.
The review also recommended the creation of nine new regional system planning bodies responsible for developing water investment plans and directing funding, with the power to streamline existing planning processes.
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