Unfortunately, I was unable to attend the Cost of Water drop-in on September 10th as requested by several constituents as I spent much of the day in the Chamber for the Winter Fuel Payment debates but I asked one of my parliamentary staff to attend on my behalf.
I completely understand the concerns held by many of my constituents which range from water bills, sewage pollution and the impact on the environment to the debate between the benefits of privatisation and nationalisation.
The financial resilience of the water sector is incredibly important, both locally and nationally and I appreciate the specific concerns about Thames Water’s financial performance and how this may affect customers. In my constituency of East Grinstead and Uckfield, Thames Water provides services to 9% of constituents. Ofwat, as the independent regulator for the sector, has responsibility and must continue to work closely with all the water companies, including Thames Water, and ensure robust action is taken when financial resilience needs to be improved.
In July 2024, Ofwat announced that it was allowing Thames Water £16.9 billion to invest in improving services for customers and the environment. I understand that around 20 per cent of the £16.9 billion funding is conditional on the company demonstrating it is ready and able to effectively deploy investment or that the investment will be effectively and efficiently targeted.
Furthermore, in light of concerns about the company’s performance, Ofwat is imposing a Turnaround Oversight Regime on the company. As part of this, Thames Water will be required to provide a ‘delivery action plan’ which sets out the actions the company proposes to take to expand its delivery capacity. The company must report on its progress regularly, subject to review and additional scrutiny by an independent third-party assurance provider. In addition, it is required to fully re-evaluate its plans for transformation in order to demonstrate how it will deliver the necessary step change in operational performance. Finally, the company must provide a financial resilience plan in response to the draft determinations.
Under these determinations, Thames Water will only be allowed to increase bills by 22 per cent, not 44 per cent as it requested. Because of this potential shortfall, I understand Thames Water is engaging with potential investors and creditors to improve its funding position. Should Thames Water be unable to shore up its financial position adequately, it is possible the Government may have to place Thames Water in a special administration regime. The Government has not spelt out what this would involve but I understand that prior to the election, the now Business Secretary said that he would not wish to see a nationalisation.
Thames Water has also agreed, subject to consultation, for an independent monitor to report on the company’s progress, including against its transformation plan. I understand the independent monitor will report back to Ofwat frequently and be entitled to access company information.
Ofwat must continue to monitor and engage robustly with Thames Water on its financial resilience and the Government must be frank with consumers about any plans to step in.
