A new commission could ban English water companies making profits

Plans for a total overhaul of the system could prevent water companies in England from making profits. A new commission, set up by the Department for Environment, Food and Rural Affairs, is considering the idea in response to public outrage over how firms prioritize profit over the environment.

According to sources at the Department, they are considering forcing the sale of English water companies to firms who would run them on a not-for profit basis. The company would be run not by the government, but by a private firm that is run for the public good, unlike under nationalisation.

The nonprofit model is used widely in Europe and allows employees to receive substantial salaries and bonuses, but profits over that amount are returned to company. Welsh water is run under this model. There are no shareholders, and all surplus money goes back into the company or customer service.

Welsh Water has significantly reduced its debt since it was acquired by Glas Cymru in 2001. Its debt-to-equity ratio has fallen from 93% down to 58%.

Steve Reed, the environment secretary, stated: “Our waters are polluted, and our water system needs urgent repair.” We have created a water commission today to help attract the necessary investment to fix our water infrastructure and clean up our waterways. The findings of the commission will be used to shape new legislation for reforming the water sector in order to better serve the needs of customers and the environmental.

Ofwat is currently deciding how much water companies can increase their bills. Water firms have asked Ofwat to allow them to do so by as much as 84% in the next five-year period. Defra officials stated on Tuesday that all options are on the table for reforming the regulators. This includes abolishing Ofwat.

In recent years, public anger has increased over the large amounts of money that water bosses have made in England. Water supplies in England are shrinking while sewage is spilled in rivers.

The mismanagement of companies like Thames Water has also been a source of anger. These companies have accumulated billions of dollars in debt while paying dividends to shareholders. Since 1989, English and Welsh water companies have paid £78bn of dividends and accrued £60bn of debt.

Reed stated that he would not be considering nationalisation in the review. This would cost “tens and billions of pounds”.

The commission, headed by former deputy governor of Bank of England Jon Cunliffe will examine all other options in order to build infrastructure and stop sewage from spilling into waterways.

Cunliffe’s independent commission will rely on a panel consisting of experts in the regulatory, environmental, health, engineering and customer sectors, as well as investors, economists, and investors. The panel will not include representatives of water companies, but they will be asked for their opinions.

Environmental groups expressed their concern after Defra stated that the main aim of the commission is to reform regulators in order to encourage investment and growth. The environmental groups have stated that economic growth should not take precedence over the environment. However, Defra officials said without investment the necessary reservoirs and sewers to combat climate and nature emergencies cannot be built.

James Wallace, CEO of River Action campaign group, stated: “We cannot sacrifice the environment on the altar to economic growth.” The water commission has to stop international investors and vampiric businesses from sucking lifeblood and money out of our communities and waterways. It must produce a fully-funded national action plan that will end pollution for profit and enforce laws.

Looking at our European neighbours reveals a variety of approaches, from fully nationalised organisations to non-profit organizations including a mix of private and public models. It is important to have an effective economic and environment regulation which encourages operating for the public good and penalises polluters.

Doug Parr is policy director at Greenpeace UK. He said that the fact that the industry has been marketed to attract big international investors such as Macquarie, is exactly the reason our waterways today are in a terrible state. We need a regulatory framework that will force the industry to meet a minimum standard of service. This includes a ban on the discharge of raw sewage.

“If international investors cannot make a profit in this environment, it is clear that the problem can’t be solved by international investors. The government will need to look at alternative ownership options, as every other country has done.”

The independent commission’s decisions will not be implemented until the 2029 review of prices. Water companies have requested that their bills be increased by a greater amount than at the start of the price review process, which will set water bill levels for the next five-year period.

Thames Water wants to increase bills by 53%, to an average £667 per year by 2029/30. This would make them the most expensive bills in the UK. Southern Water wants the largest increase at 84%.

Ofwat’s final decision on how much water bill can increase will be made on 19th December. However, its interim decision from July stated that the average bill may rise by 21% per year. On Tuesday, government sources confirmed that this number may rise.

Prime Minister’s spokesperson stated: “No one wanted a situation in which water bills were rising and the water sector was in the state it is now, with record numbers of sewage spills, and an aging infrastructure. The government wants to make sure money is spent where it is needed, and that water companies put customers first. “If money is not spent, it will return to the customers.”