(Bloomberg) -- Former Bank of England Deputy Governor Jon Cunliffe will lead a major review into the UK’s privatized water industry as it faces mounting public anger over sewage spills and rising bills.
Water companies have proposed hiking prices for consumers by an average of 40% to fund a £107 billion investment program aimed at tackling chronic leaks, pollution and climate change. That’s led to calls by some politicians and companies for a more fundamental overhaul of the industry.
Cunliffe is set to appoint an independent panel of experts which will report back by June, according to a statement by the Department for Environment, Food and Rural Affairs. While the panel won’t be able to recommend renationalizing the industry, it could suggest abolishing regulator Ofwat, which was established in 1989 by former Prime Minister Margaret Thatcher.
Chancellor of the Exchequer Rachel Reeves last week blamed regulators for “crumbling” infrastructure by failing to prioritize investment in assets such as new reservoirs and sewage treatment works. Industry rules set by Ofwat also allowed investors to take advantage by raising debt to pay high dividends.
Some water companies — most notably Thames Water Utilities Ltd. — now face unsustainable debt levels. The UK’s largest water supplier risks entering special administration if it can’t raise £3.3 billion in new equity. Rising interest rates in 2022 added to its financial strains just as it faced pressure to spend billions of pounds to fix its leaking infrastructure.
“Our waterways are polluted and our water system urgently needs fixing. That is why today we have launched a Water Commission to attract the investment we need to clean up our waterways and rebuild our broken water infrastructure,” said Environment Secretary Steve Reed.
Ofwat separately started a consultation on Tuesday seeking to ban bonuses for water company executives if they fail to meet environmental standards. At the moment, Ofwat can only ensure bonuses are not paid using customer money, though they can still be paid by shareholders.
Chris Weston, the chief executive officer of Thames Water, has already come under fire this year for taking a £195,000 bonus, despite only starting the job in January.
©2024 Bloomberg L.P.