In setting up the current Water Commission Review, the Secretary of State for the Environment insisted that the broken water company model should not be considered for change.
On the contrary, it is at the heart of the water sector chaos and is crying out for restructuring, as ably demonstrated by the recent BBC Two Thames Water fly-on-the-wall documentaries—both still available on BBC iPlayer. Worth a watch.
Meanwhile, I thought I would scrutinise four water companies, including our own South West Water, to further demonstrate the urgent need for reform.
Example 1
A water company operating in a monopoly of 16 million people.
- £19 billion debt.
- £3 billion short-term market loan, costing almost £1 billion in interest charges.
- More prosecutions on the way.
- Pleading for regulatory fines to be deferred or cancelled.
- Delaying current debt repayments.
- Deferring CMA appeal.
Government spokesman: “The company remains stable” (?)
Enough of Thames Water.
Example 2
A water company operating in a monopoly of almost two million people.
- Awaiting DWI report on the 2024 drinking water contamination that left 20,000 people boiling their water for eight weeks.
- 2023: £2 million pollution fine.
- 2025: Likely EA prosecution for gross pollution of Exmouth beaches at peak holiday season in 2024.
- 2024: Defra, EA, and Ofwat joint letter highlights "serious concerns with the company’s security of supply and risk to the environment, with immediate action needed."
- The fifth consecutive year SWW has received a joint regulators' letter.
Enough of South West Water…
Example 3
A water company providing water services to 2.7 million people and wastewater services to 4.7 million…
- December 2024: 58,000 customers experienced major water interruptions.
- Previous interruptions: November 2023: 18,000 customers.May 2023: 25,000 customers.February 2023: 15,000 customers.December 2022: 20,000 customers.
- £90 million fine in 2021 for widespread pollution of rivers and coastal waters off Kent, Surrey, and Sussex.
- £330,000 fine in 2024 for a fish kill in a Southampton stream.
Enough of Southern Water.
Example 4
A water company operating in a monopoly of 4.7 million customers.
- 2024: Fined over £2 million for polluting the River Trent near Stoke in 2019 and 2020. The EA called its storm contingency plans “woefully inadequate.”
- A BBC Panorama investigation accused the company of a “complex accounting trick.”
Panorama reported: "A shell company, with no money or assets, called Severn Trent Trimpley, was set up as part of the group. Another company, Severn Trent Draycote—which owns the water company—agreed to buy Trimpley for £2. Trimpley then issued additional shares, and Draycote bought them for £3 billion.
No money actually changed hands. Draycote paid Trimpley with a £3 billion loan note—effectively an IOU. On paper, Trimpley immediately appeared to be worth £3 billion because it had the IOU. Severn Trent Water then acquired 49 per cent of Trimpley, and that investment was valued in the water company’s accounts at £1.47 billion."
All clear? No? Well, it wasn’t to me either—or to members of the House of Commons Environment, Food & Rural Affairs Committee, who grilled the CEO of Severn Trent for over 40 minutes in February. Despite spending almost half their allotted time on the issue, MPs had no better understanding by the end than when they started.
Enough of Severn Trent Water.
Despite these examples—and the shocking failures of the current water company model—the Government has no plans to change it. In fact, it instructed the Water Commission Review not to recommend any change.
You couldn’t make it up, could you?
Unlike some creative accountants!