Ofwat to be replaced with ‘new regulator’ amid Thames Water crisis
Ofwat, the water watchdog, is expected to be abolished and replaced by a new body next week after facing intense scrutiny over sewage firms and the poor performance of major companies including Thames Water, according to reports.
A consultation on the creation of a new regulator is expected to be announced next week after results of a review by former Bank of England deputy governor Sir Jon Cunliffe are published, The Guardian has reported.
Earlier on Friday, official data was revealed serious pollution incidents by water companies had increased by 60 per cent in 2024 compared to the year before.
The Environment Agency said Thames Water made up nearly a half of all serious pollution events, accounting for 33 of 75 incidents.
The Guardian reported that the water company was in talks with Ofwat over a takeover by creditors who hold its debt while trying to avoid fines and penalties.
Private equity giant KKR pulled out of a deal to acquire an equity stake in Thames Water, leaving the debt-trodden company in a race against time to avoid temporary nationalisation.
Ofwat facing scrutiny
Thames Water is still struggling to manage £20bn in debt, with multi-million pound fines over sewage spills and shareholder payouts continuing to dog bosses at the company.
Its chair Sir Adrian Montague, a City veteran, said it would take a decade for fortunes to be turned around after it posted a £1.6bn loss in the year to March.
Cunliffe’s review is expected to recommend vast structural reforms that will seek to remedy a sector which has been at the centre of public scrutiny for years over environmental damage, unstable finances and high bills.
An interim report called for a “fundamental reset” of the industry, with “no simple, single change” to reverse trends across water companies.
Cunliffe has been prevented by the government from considering public ownership of water in his remit.
MPs on the Public Accounts Committee (PAC) said on Friday that the water sector had to be transformed into a “low risk, low return” environment where regulatory powers were strengthened over ruling against high dividends and unlawful practices.
“Customer trust is at the lowest level in more than a decade driven by poor company performance, particularly on the environment,” a PAC report warned.