The water regulator has urged the sector to rebuild public trust following concerns about corporate behaviour and service failures that left thousands without a supply during the recent cold snap.
Ofwat chairman Jonson Cox has written to Environment Secretary Michael Gove setting out its agenda to improve the performance of water companies, acknowledging that “some companies are seen as focused on financial engineering at the expense of public service”.
The regulator said it will reform company licences to “make it even clearer that companies must put customers at the heart of everything they do”, step up demands on transparency around dividends and profits, and expected companies to meet their obligations before making dividend payments.
Weâve set out an agenda of reforms to bring the water sector back in balance https://t.co/Ru7e5XMFOr— Ofwat (@Ofwat) April 10, 2018
It said it also expected water company boards to explain executive bonuses by reference to exceptional delivery for customers.
Ofwat’s agenda follows its criticism that some providers had “fallen well short” in planning for the forecasted Beast from the East that left thousands without a water supply after frozen pipes thawed and cracked.
Mr Cox said: “Some water companies appear to be focused too much on financial engineering at the expense of public service.
“Alongside this, we’ve seen significant service failures, most recently following last month’s cold snap and quick thaw, which led to tens of thousands of customers being left without water.
“All of these things have damaged trust in water.
“Ofwat has been pushing water companies to up their game for some time; but we need to go further, faster.
Consumer Council for Water chief executive Tony Smith said: “Action by the regulator Ofwat to force all water companies to treat their customers fairly, and be seen to be fair and trustworthy, is long overdue and something we have repeatedly called for.
“Water companies need to respond positively to this challenge. The legitimacy of the water industry in customers’ eyes is on the line.”
Water UK chief executive Michael Roberts said: “All companies take very seriously their responsibility to act in the public interest and to operate to the highest standards.
“We support the direction of travel to tackle issues of concern, in a way that recognises that the sector is diverse and that not all the issues are relevant for all the water companies.
“We look forward to discussions with all involved on next steps.”
Environment Agency chairwoman Emma Howard Boyd said: “We welcome the Secretary of State and Ofwat’s call for water companies to act as diligently for their customers and the natural world as their owners.
“Since 2005, the water companies have invested billions in the environment but they are responsible for at least one serious pollution incident every week.
“They also need to do more to act on increased flood and drought risk from climate change, in line with the ambition of the Government’s 25 Year Environment Plan.”