Water sector reform must close loopholes on pollution reporting and let Ministers wield threat of special administration - EFRA committee report
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The EFRA Committee has challenged the government over its ambition
to strengthen regulation of the water sector and to wield temporary
special administration as a genuine deterrent for the worst
performing companies. The cross-party Committee's report (PDF
attached) calls for a new regulatory system to close loopholes that
allow cumulative impacts of frequent but low-level pollution to go
unpunished. It should impose new targets for water quality and
security. The...Request free trial
The EFRA Committee has challenged the government over its ambition to strengthen regulation of the water sector and to wield temporary special administration as a genuine deterrent for the worst performing companies. The cross-party Committee's report (PDF attached) calls for a new regulatory system to close loopholes that allow cumulative impacts of frequent but low-level pollution to go unpunished. It should impose new targets for water quality and security. The Committee has concerns about a new supervisory water regulator working much more closely with water companies. The government must ensure the regulator's independence with robust checks and balances on its powers and avoid regulatory capture or a revolving door between itself and water companies. The new regulator should have clear duties to inspect and monitor companies' drinking and wastewater assets. The Committee also calls for better customer protections. It welcomes the creation of a new promised Ombudsman but recommends better standards for incident responses and compensation arrangements when businesses and homes are hit by outages. MPs also call for a standardised social tariff as a minimum level of support for low-income households, among other measures to end water poverty by 2030. Sewage spills should be tackled at source by embracing nature-based solutions such as wetlands and green sustainable drainage that can treat water and take pressure off overflowing wastewater systems. This report comes in anticipation of the government introducing a Water Bill to Parliament after publishing its white paper in January. A summary of the report's conclusions and recommendations is included below. EFRA Committee Chair Alistair Carmichael MP said: A spaghetti junction of 80 pieces of legislation relating to the water sector, punctured by glaring gaps and loopholes, is one of the main reasons this industry descended into the mess it's in. We support the government's ambition to clear up this regulatory system. While we await new legislation and detail, this report sets out challenges that new reforms must rise to. New inspection and monitoring standards for both drinking water and sewage assets must be a key ingredient in delivering improvement. The worst performing companies that oversee major incidents and fail to improve must face a genuine threat of turnaround regimes and, in the worst circumstances, special administration to find new owners. We maintain that Thames Water should have fallen foul of this measure already. A new regulator should have stronger oversight of companies' operations without getting too close for comfort. Strict recruitment rules should prevent a revolving door between poacher and game keeper. Customers deserve a better deal, with clearer rules on compensation after the kind of supply failures experienced in Kent and Sussex this year. A social tariff for low-income households should be a minimal step towards the industry's own pledge to eradicate water poverty, and an Ombudsman should ensure customers have a reliable means of recourse when they are let down. We also call for Defra and water companies to put more energy into developing nature-based solutions that take pressure off our ageing drainage and sewage systems, which will in turn help to reduce dumping into rivers. New streamlined regulation The Committee says that a new cohesive legal framework is needed that must cover gaps in regulation. It should be set up by 2030 and entail a more interventionist approach that can tackle emerging risks to the environment, drinking water supply and promote better crisis planning. Meanwhile, the sector's inability to reduce wastewater pollution over many years, whilst remaining compliant with regulations, is itself evidence that the current regulatory regime fails to incentivise improvement. In that new legal framework, MPs call for:
The Committee also calls for a statutory framework that enables regulations to be updated quickly in the face of legacy or new issues, such as PFAS/forever chemicals, microplastics, climate change and tackling misinformation. The new regulator The Committee tentatively supports the government's proposal for an integrated regulator that combines functions of Ofwat, the Environment Agency, the Drinking Water Inspectorate and Natural England but says the new system must preserve aspects of those bodies that are working well. The report recommends:
Stronger enforcement The Environment Agency has been criticised for failing to take action against companies regarding pollution from sewage overflows. The Agency's widespread use of enforcement undertaking orders, which require the offender to cease and carry out restoration work, can be useful but have failed to act as a deterrent in some cases. However, the Committee does not support increasing the size of fines, as it heard evidence that this can lead to a doom loop in which companies find it more difficult to pay for infrastructure improvements that would reduce pollution incidents. The Committee recommends more rigorous turnaround regimes for persistent or particularly serious failures. The government should also be ready to bring failing companies in temporary Special Administration Regimes this threat should deter poor performance. The regulator should also be able to inspect and take action against companies thatfail to keep contingency plans for supply outages or other high impact incidents, such as those experienced by South East Water in 2025 and 2026. The Water Ombudsman A new Water Ombudsman should provide recourse to customers who are mistreated by their water company something currently missing from the regulatory and enforcement system. However, the new system should preserve the positive customer advocacy work undertaken by the Consumer Council for Water. Support for low-income customers The government should explore protecting low-income households through a national social tariff. But this would be a minimum level of support water companies should provide customers. The Committee also says improved data collection and annual reporting are needed to enable for more targeted support. These actions should support the water industry's own pledge to eradicate water poverty by 2030. Clearer expectations on compensation In response to this report, the government should set out how it will mandate more specific and measurable requirements for how companies respond to serious incidents. This should make it easier for both customers and companies to understand how companies should react to serious incidents. By 2028, the government must conduct an analysis of the potential for improved compensation arrangements for when the Guaranteed Standards Scheme does not entail sufficient cover for lost revenues or values lost. In particular, the government should consider:
ENDS Further information
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