The water sector is braced for a legal storm as environmental group River Action prepares to take Ofwat, the water regulator, to court. The group accuses Ofwat of unlawfully allowing customers to foot the bill for decades of industry neglect. This bold move could reshape the dynamics of water management and infrastructure investment in the UK.
River Action’s legal claim, to be filed this month, argues that Ofwat has approved bill increases that will be used to fix infrastructure failures that should have been addressed long ago. The group contends that customers could be forced to pay twice: once for the original service and again for the repairs. This is a stark allegation that challenges the very foundation of how water companies and regulators operate.
At the heart of the issue is the principle that the public should not pay for investments to make water companies compliant with their operating permits. This includes adhering to limits on raw sewage discharges into rivers and ensuring treatment works function properly. Water companies are already under scrutiny by Ofwat for permit breaches, with a parallel criminal investigation by the Environment Agency adding to the pressure.
River Action’s legal challenge zeroes in on funding allocated for wastewater treatment works and pumping stations by United Utilities in and around Lake Windermere. The group alleges that Ofwat has permitted United Utilities to divert funds meant for future projects to address past failures. While it is not suggested that United Utilities has acted unlawfully, the implication is that Ofwat has turned a blind eye to a systemic issue.
Emma Dearnaley, the head of legal at River Action, is unequivocal in her criticism. “We believe Ofwat has acted unlawfully by approving … funds without ensuring they are spent on genuine improvements to essential infrastructure,” she said. “Instead, this … funding is being allowed to be used to cover up years of failure.” This is a direct challenge to Ofwat’s regulatory oversight and could set a precedent for how regulators and water companies are held accountable.
The broader implications of this legal action are significant. River Action believes that under PR24, the price review approved by Ofwat in January, other firms may be operating similarly, leaving customers to pay for failings that should have been fixed with previous funding. Ricardo Gama, of Leigh Day, which is representing the campaign group, said, “Ofwat has said … it won’t let price rises be spent on fixing historic issues which are leading water companies to breach their permits. They’ve said in black-and-white terms that customers won’t be expected to pay twice. But in documents seen by River Action it looks like Ofwat hasn’t done its homework in checking whether the money it’s letting United Utilities take from customers will actually be used for that purpose.”
Ofwat, however, rejects these claims. A spokesperson stated, “We reject River Action’s claims. The PR24 process methodically scrutinised business plans to ensure that customers were getting fair value and investment was justified. We agree that customers should not pay twice for companies to regain compliance with environmental permits, and have included appropriate safeguards in our PR24 determinations to ensure this, which we will monitor closely, taking action if required. We will respond to their letter in due course.”
This legal battle could force a reckoning within the water sector. If River Action’s claims are upheld, it could lead to a fundamental shift in how water companies are regulated and how infrastructure investments are funded. It could also embolden other environmental groups to challenge regulatory decisions, potentially leading to a more transparent and accountable water sector. The outcome of this legal action will be closely watched, as it has the potential to reshape the future of water management in the UK.
