2nd report - Priorities for water sector reform
Select Committee
Environment, Food and Rural Affairs Committee
HC 1001
16 June 2025
No response data available yet.
Recommendations
1 results
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Require Independent Water Commission to analyse water company ownership models and owner vetting.
Recommendation
We urge the Independent Water Commission to analyse all potential water company ownership models to determine which models are most likely to lead to a thriving and responsible culture. The Commission should then outline the steps needed to encourage those …
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Conclusions (27) Observations and findings — click to expand
1
Conclusion
Different models of ownership could offer a better culture of responsible leadership, which is key to a thriving water sector. A variety of corporate ownership options should be on the table for the water sector. As well as the publicly and privately owned businesses, options include not-for-profit enterprises, Community Interest …
3
Conclusion
Given the wide array of performance issues across the sector, more responsible leadership is clearly needed for better stewardship of our natural water resources. Incremental steps have been taken to improve governance, increase consumer representation and influence bonus cultures in order to improve decision-making, but we are not satisfied that …
4
Conclusion
The Independent Water Commission should consider what other reforms are necessary to ensure that the right people are put into senior positions and the appropriate bonuses are paid to them. This should include greater oversight or approval from Ofwat before appointments are made and bonuses are paid; clearer statutory expectations …
5
Conclusion
Trust and accountability in the water sector is very low and water companies must improve transparency through open data and more collaboration with consumers. (Conclusion, Paragraph 16)
6
Conclusion
The Independent Water Commission should consider how the link between water companies, communities and citizen scientists could be strengthened and formalised to provide a broader picture of water quality in local regions. These proposals should consider how water companies can be democratised and made as open as possible, with a …
7
Conclusion
Complex financial structures are not necessarily a problem, but they can obscure water company finances, enable bad practices, undermine transparency and worsen the public perception of water companies. Water companies increasingly look like financial institutions rather than businesses servicing monopolised critical infrastructure. These structures have undoubtedly been used, in some …
8
Conclusion
The Independent Water Commission should determine how regulators can have better oversight over debt levels in regulated entities and other connected companies. Its proposals should actively require companies to simplify structures to allow for greater regulation and oversight of any company’s true financial situation. (Recommendation, Paragraph 21)
9
Conclusion
There has been serious economic mismanagement of companies, leading to unsustainable levels of debt and a high price for consumers. This situation must be resolved and a culture of relying on debt must never be allowed to 47 arise again. Since investment levels and revenues in the sector have clearly …
10
Conclusion
The Independent Water Commission should determine new measures to regulate the accumulation and management of debt in the water sector. These measures should allow the economic regulator to intervene when irresponsible debt management is taking place. Any new powers should be tempered by a realistic and consistent understanding of what …
11
Conclusion
There clearly have been examples of excessive dividends, particularly when poor performance or finances are taken into account, symptomatic of a culture of prioritising profit over duties to regulators and customers. However, dividends for other companies have been in line with regulatory expectations. Dividends are controversial, particularly when total shareholder …
12
Conclusion
The Independent Water Commission must determine whether equity investment has been value for money for customers. If it is advisable to continue with a totally privatised model, the Commission needs to create a comprehensive but stable regulatory environment for water companies and their investors to ensure that the sector is …
13
Conclusion
Special administration should be a last resort. However, it is unclear whether allowing a failing company to struggle on and accumulate progressively more debt is a better outcome than assuming temporary national control more quickly, with the associated costs that it could incur. (Conclusion, Paragraph 35)
14
Conclusion
The Independent Water Commission must provide recommendations on improving the special administration regime which, while it should still be a last resort, must ensure that the criteria for its deployment are sufficient for ensuring value for money for customers. (Recommendation, Paragraph 36) The price review process
15
Conclusion
Customers should be protected from paying more than is necessary for maintaining national water infrastructure, and the price review is an important part of doing this. Some evidence suggests that previous determinations have not been sufficient, at least for some companies, to keep up maintenance and stakeholders have suggested a …
16
Conclusion
The Independent Water Commission must ensure that water bills and spending allowances are sustainable and appropriate for maintaining assets and delivering services. If the price review process is retained, the Commission must begin the process of reforming it to ensure that allowances are calculated fairly and openly, and to ensure …
17
Conclusion
The incentives that Ofwat puts in place for companies are too complicated, fail to match public expectations, and in many cases are not bringing about a culture of improvement. Despite public consultation, there are too many to provide a clear picture of company performance. There is scope for simplification and, …
18
Conclusion
The Independent Water Commission’s proposals should ensure that the price review system is reshaped so that its system of incentives creates a culture of improvement. The price review should contain a comprehensive but straightforward set of performance metrics that matches public expectations and national targets for water. Targets should be …
19
Conclusion
Environmental regulation and the delivery of a reliable and safe water must be the first priorities of water companies and regulators. Effective regulation, strongly prioritised towards environmental and customer targets, is needed to make these a core part of the culture amongst water companies; it will also need to cover …
20
Conclusion
The Independent Water Commission should look at potential reforms of the regulatory frameworks and regulators that govern the water sector to ensure that environmental protection is effective and a priority for water companies. It is vital that the reforms the Commission proposes can accommodate and synchronise with wider reforms, such …
21
Conclusion
We support the Commission’s focus on creating a better regulatory framework, however a good framework is nothing without well-equipped regulators to act against bad actors and poor behaviours. Without clearer information and standards, it is difficult to have faith that monitoring and enforcement levels are sufficient, and we wonder if …
22
Conclusion
The Independent Water Commission should assess how effectively the regulators audit companies, monitor the water environment, and enforce breaches of licences and permits. It should consider whether regulators are leveraging enough fees from the sector to ensure robust, fair and quick monitoring and enforcement of environmental protections. To bring about …
23
Conclusion
The current regulatory system does not encourage long-term thinking, as already acknowledged by the Commission. This affects both short-term resilience against asset failures and long-term water security. Improved finances may help, but part of the problem is, like in many other sectors, a 51 lack of coherent resilience standards for …
24
Conclusion
The Independent Water Commission should determine how the price review and regulatory systems can encourage better resilience, both to protect customers from short-term shocks and ensure that water resources are safeguarded in the future. This should begin a process of creating a robust set of resilience standards for the industry, …
25
Conclusion
Evidence suggests that some water companies are not sufficiently protecting or compensating their consumers before, during or after high impact incidents such as supply interruptions and sewer flooding. Regulatory steps are being taken to address most of these concerns, although it remains to be seen if these new measures will …
26
Conclusion
The Independent Water Commission should assess whether Ofwat’s new customer-focussed licence condition, and the new Guaranteed Standards of Service, are sufficient to improve protective services for consumers during and after high-impact events. The Commission and Defra must address the issues of local coordination with other key bodies and communication with …
27
Conclusion
The Government has not yet set out a timetable for developing a single and comprehensive social tariff to prevent protect low-income households from bill increases, despite the widespread view that it will be necessary in the context of much higher bills. This is a necessary step that allows the regulatory …
28
Conclusion
The Independent Water Commission’s proposals should contain provisions for establishing a single social tariff, or other protections for low-income households, to protect customers from the worst impacts of anticipated bill increases. The Commission’s proposals should also establish how effectively water poverty is being tackled and whether more effective tools are …