Ofwat proposes £168m in fines for three water companies over sewage spills

Ofwat has proposed £168 million of fines for three of England’s biggest water companies for failing to manage sewage spills, including a £104 million penalty for Thames Water.

The water regulator proposed the fine for Thames, as well as a £47 million penalty for Yorkshire Water and £17 million for Northumbrian Water, as the first batch of results from its biggest ever investigation into the industry.

The penalties relate to water firms’ management of their wastewater treatment and sewer systems, which have come under heavy criticism for releasing too much pollution into rivers.

In an announcement on Tuesday morning, Ofwat said the firms “failed to ensure that discharges of untreated wastewater from storm overflows occur only in exceptional circumstances, which has resulted in harm to the environment and their customers”.

It added that there was a “strong correlation” between high spill levels and operational issues at their wastewater treatment sites, “which points to these companies not having properly operated and maintained their wastewater treatment works”.

It said the firms had failed to upgrade their assets where necessary, and had been slow to grasp their obligations to limit pollution from storm overflows.

Ofwat chief executive David Black stressed that the burden of the fines will fall on investors, rather than customers.

He said it is “not at all” the case that the penalties on Thames Water, Yorkshire Water and Northumbrian Water will result in higher bills.

“We set the rules on what charges they can recover from customers, so we make absolutely no provision for fines in the levels of bills that is set for customers,” he told Sky News.

“Customers can be reassured these fines sit with investors, not with customers of the water companies.”

He also admitted that Thames Water “faces serious challenges” but said the regulator will “not relent in enforcing their obligations whatever the financial circumstances”.

He said it was “not a relevant consideration” for the watchdog that such a penalty could tip the struggling utility firm into bankruptcy.

Thames Water’s fine amounts to 9% of the company’s turnover, just shy of the 10% maximum Ofwat is allowed to impose.

Mr Black said: “That recognises the seriousness of the breaches we have uncovered.”

He told the BBC that three more water companies, Anglian Water, Wessex Water and South West Water, will face proposed rulings as part of a similar investigation later this year.

Meanwhile, Severn Trent, United Utilities, Dwr Water – the Welsh Water company – and Hafren Dyfrdwy, will face rulings after that.

“We appreciate the need to get to the bottom of these issues as soon as possible, and we’re working to address this,” he said.

However, he suggested that companies could seek to reduce the fines if they commit to redressing the problems.

Mr Black said: “This is a draft decision, companies can propose a settlement offer to us, which if they address the issues in terms of fixing the problems and ensuring that this doesn’t happen again, then we could take that into account in terms of our final decision.

“These are very serious findings – what we’ve uncovered is a catalogue of failures, and it’s very clear that companies have not been adequately addressing these issues – that reflects the public concern and outrage, and that’s why we’ve acted today.”

Environment Secretary Steve Reed welcomed the fines.

“The unacceptable destruction of our waterways should never have been allowed – and it is right that those responsible for illegally polluting our rivers, lakes and seas face the consequences,” he said.

“This Government will fundamentally reform the water sector.

“We have announced our first steps to clean up the water industry in our Water (Special Measures) Bill, to cut sewage pollution, protect customers and attract investment to upgrade its crumbling infrastructure.

“We will outline further legislation to transform and reset our water industry and restore our rivers, lakes and seas to good health.”

Ofwat said more than two-thirds of Thames Water’s wastewater treatment works with Flow to Full Treatment (FFT) permits had capacity and operational issues, while one in six of its storm overflows were found to be in breach of regulations.

Yorkshire Water’s wastewater treatment works were in better shape, with just 16% of them having operational issues. But 45% of its storm overflows were in breach.

And 3% of Northumbrian Water’s wastewater works had issues, while 9% of its storm overflows were in breach.

Meanwhile, Charles Watson, chairman of campaign group River Action, said: “Thankfully the water regulator, for so long toothless, is finally waking up to the scale of the public’s outrage and we are starting to see some meaningful penalties being imposed upon the worst offenders.”

He also criticised water companies for paying out billions in shareholder dividends in recent years.

“Until the ability of these polluting companies to hand out so much cash is severely curtailed, pollution will continue to be a highly profitable activity with inadequate incentives for the water companies to fix their creaking infrastructure and stop filling our rivers with raw sewage,” he said.

A Yorkshire Water spokesman said the firm is “disappointed” with the proposed fine and that it had “co-operated fully” with the investigation.

The spokesman pointed to a £180 million plan to reduce sewage discharges before April 2025.

He added: “We will be responding to the notice by September 10.”

A Thames Water spokesman said: “We regard all untreated discharges as unacceptable, even when they are permitted, and are taking action to improve the health of our rivers as a key area of focus and investment.”

The spokesman suggested Ofwat may reduce the financial penalty if Thames Water commits to redress the failures, adding that the company will respond to the proposed fine “in due course”.

Northumbrian Water has been approached for comment.