The UK’s largest water company, Thames Water, has been placed under a specialized “turnaround oversight regime” by water regulator Ofwat.
This measure mandates the company to revise its business plan and undergo increased supervision.
The regulator stated that it was imposing “heightened regulatory” measures due to “concerns over the company’s performance.”
Household Bill Increases Approved
This decision coincided with Ofwat’s approval of a 21% increase in average household water bills across England and Wales over the next five years, falling short of the amount requested by water companies.
This means households can expect an average bill increase of £94 between 2025 and 2030.
Business Plans and Public Outrage
Since the industry’s privatization three decades ago, water companies have been required to submit business plans, including proposed bill increases and investments, to the regulator every five years.
While the industry has faced public backlash over sewage pollution, Thames Water has become a focal point for anger directed at the sector.
Thames Water’s Financial Struggles
In its ruling on Thames Water’s latest business plan, Ofwat determined the company could raise household bills from an average of £436 this year to £535 by 2030, significantly less than the £627 the utility had sought.
Thames Water, which provides water and sewage services to roughly 16 million households, has been grappling with a multibillion-pound debt burden, increased costs, and the need for infrastructure upgrades over the past year.
Its crisis intensified in March when shareholders withdrew from a plan to inject £500 million and labeled the utility “uninvestable.”
Turnaround Action Plan
As part of the regime implemented by Ofwat, Thames Water will be required to provide a “delivery action plan” and demonstrate how it will achieve the “necessary step change in performance.”
Ofwat chief executive David Black stated, “Our draft decisions on company plans approve a tripling of investment to deliver sustained improvement to customer service and the environment at a fair price to customers.”
Government Response
The Thames Water crisis presents one of the first major challenges for the new Labour government, which has expressed a desire to avoid renationalizing the company.
The Financial Times reported on Wednesday that the government is drafting legislation to place failing companies under “special measures.” This includes a ban on bonuses for executives of heavily polluting companies, criminal charges for the worst offenders, and stricter monitoring of sewage outflows.