Following Michael Gove’s full frontal assault on the water companies and their recent failings in the cold weather Oftwat’s chair Jonson Cox sets out further measures.

Ofwat sets out package of reforms for water sector

Ofwat has today set out its agenda for rebuilding public trust in the water sector, as it continues to push water companies to act in the interests of their customers. The water industry regulator has been leading a concerted drive to bring change to the water sector and to tackle some of the practices that have been a cause for concern with customers. In a letter to the Secretary of State for Environment, Food and Rural Affairs, Ofwat’s chair, Jonson Cox, told the Minister:

“We know that the level of dividend pay-outs from highly leveraged companies aggravates customers and the public.” …”We will make sure that water companies “do not use financial engineering to inflate one-sided returns to investors, or are rewarded at the expense of their customers.”

As the next step, the letter sets out the package of measures to improve corporate behaviours, including:

  • Reforming company licences to make it even clearer that companies must put customers at the heart of everything they do;
  • Looking to companies to share with customers any financial benefits they make from taking on additional gearing;
  • Setting tighter standards to make sure companies are financially resilient in the long term;
  • Stepping up demands on transparency around dividends and profits, including a clear expectation that companies meet their obligations to customers before making dividend payments and take fair account of employee interests such as pension deficits;
  • Addressing concerns around executive pay, including an expectation that water company boards explain executive bonuses by reference to exceptional delivery for customers.

“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. Click here to read the letter

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