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Ofwat has opened cases into four more water and wastewater companies, expanding its investigation of sewage outflows to all water and sewage utilities in England and Wales.
Severn Trent, United Utilities, Dŵr Cymru Welsh Water and Hafren Dyfrdwy will be included in Ofwat’s investigation into how companies manage their wastewater treatment works, the regulator said on Tuesday.
David Black, chief executive of Ofwat, said it was the “largest and most complex investigation Ofwat has undertaken”.
“The fact that Ofwat now has enforcement cases with all 11 of the wastewater companies in England and Wales demonstrates how concerned we are about the sector’s environmental performance,” he said.
Water companies are facing an onslaught of regulatory and legal cases following evidence that they are tipping unknown quantities of raw effluent and storm water into coastal waters, rivers and lakes, risking the environment and public health.
Last week the Supreme Court ruled that private landowners and individuals can seek redress for sewage released into UK waterways, paving the way for further legal claims.
The Environment Agency, another regulator, is also conducting its largest-ever criminal investigation into potential widespread non-compliance by water and sewerage companies at more than 2,200 sewage treatment works.
The string of legal cases and fines may make it harder for water companies to raise equity needed for their businesses to keep running and to improve infrastructure.
Thames Water, the largest water utility, needs to raise £750mn from investors by next April and a further £2.5bn by 2030 if it is to avoid being taken under the government’s special administration regime, a form of temporary renationalisation.
Colm Gibson, managing director of European economic regulation at Berkeley Research Group, said the announcement “increased uncertainty for both debt and equity investors [in water companies], with potential implications for the cost of capital Ofwat will need to allow companies to recover in the prices charged to customers”.
Ofwat’s inquiry into whether companies are breaching their licences on sewage outflows was first opened in 2021.
Water companies are allowed to tip a certain amount of effluent and storm water into water courses in times of heavy rain or snow melt under licences awarded by the Environment Agency.
However there is increasing evidence that sewage is pouring into waterways even in dry periods. Ofwat can impose fines of up to 10 per cent of turnover if they are found to have breached regulations.
Although companies often blame unpredictable weather and climate change for causing more frequent untreated sewage overflows, a study by Imperial College London last year found that by far the biggest problem was insufficient capacity at wastewater treatment plants, which meant they were releasing sewage into waterways even during dry periods.
Just 16 per cent of waterways in England and Wales meet minimum EU standards for ecological status and none meet the standards for chemicals, according to official Environment Agency data.
Investment in water infrastructure also appears to be lagging Europe. Wastewater companies in England and Wales upgrade 0.2 per cent of their assets each year, a third of the European average of 0.6 per cent, according to a 2022 report by the industry lobby group Water UK.