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Thames Water has been hit with a £104mn fine for failing to manage its sewage works, leading to effluent “routinely” flowing into rivers and seas and putting further pressure on Britain’s biggest water utility as it fights for financial survival.
Ofwat said Thames Water and two other companies — Yorkshire Water and Northumbrian Water — would be penalised for breaching regulations that require them to adequately upgrade, maintain and operate sewage treatment works.
The companies had also failed to adequately manage the plants, with executives, including at board level, failing to oversee treatment operations, the regulator said on Tuesday.
As a result, the combined sewage overflows — which are designed to release a mixture of storm water and sewage into waterways in “exceptional circumstances” — are frequently overwhelmed and “routinely” release waste into rivers and seas, the regulator said.
The companies have the right to appeal against the decision once it is made final after a consultation process closing on September 10.
Thames Water said Ofwat could decide to reduce or remove the penalty “in light of a commitment from the company to taking appropriate measures”.
Yorkshire Water was fined £47mn and Northumbrian Water fined £17mn. Seven other companies are still being investigated while Southern Water is being monitored closely after being fined for sewage pollution in 2019.
Water companies are facing an onslaught of regulatory and legal actions following evidence that they have released unknown quantities of raw effluent and storm water into national waterways, putting the environment and public health at risk.
The Environment Agency watchdog is currently conducting its largest-ever criminal investigation into potential non-compliance by water and sewerage companies at more than 2,200 sewage treatment works.
In July, the Supreme Court ruled that private landowners and individuals can seek redress for sewage released into UK waterways, paving the way for further legal claims.
The string of legal cases and fines may make it harder for water companies to raise equity needed for their businesses to keep running and to improve infrastructure.
Thames Water needs to raise £750mn from investors by next April and a further £2.5bn by 2030 if it is to avoid being taken under the government’s special administration regime, a form of temporary renationalisation. It says it has enough cash to last until May.
Ofwat said Thames Water had known about the fine since December so “should have prepared for the impact”.
Despite the poor performance Chris Weston, who joined as chief executive in January, took a £195,000 bonus for the three months to the end of March, taking his total pay to £437,000 for the period.
Thames Water is also under investigation by Ofwat for paying £195.8mn in dividends in the year to March.
The fines for the inadequate management of sewage treatment works amounted to 9 per cent of turnover at Thames Water, 7 per cent at Yorkshire Water and 5 per cent at Northumbrian Water — short of the full 10 per cent penalty available to Ofwat.
Ofwat has also issued a proposed “enforcement” order, which requires companies to deliver a remediation plan, setting out how they will improve the networks.
David Black, chief executive of Ofwat, said it had “uncovered a catalogue of failure by Thames Water, Yorkshire Water and Northumbrian Water in how they ran their sewage works and this resulted in excessive spills from storm overflows”.
“Our investigation has shown how they routinely released sewage into our rivers and seas, rather than ensuring that this only happens in exceptional circumstances as the law intends.”
Thames Water has warned its ageing assets pose “a risk to public safety, water supply and the environment”. In documents seen by the Financial Times, the company said it has about £19bn of assets that are in “poor” or “failed condition” or are “no longer capable of reliably performing their function”.
Thames Water said it regards “all untreated discharges as unacceptable”.
“We are encouraged that Ofwat recognises that in order to resolve the issues identified any redress needs to be deliverable, affordable and financeable,” it added.
