According to The Guardian, the Environment Agency is planning to amend the Environmental Performance Assessment, tightening the rules to stop water companies from using the current highest four-star ratings to justify high CEO pay.
The newspaper says that bosses presiding over companies found to “recklessly” discharge sewage have been able to justify their large pay packets because of being awarded the top rating, while companies that preside over sewage spills can call themselves “industry leaders”.
The regulator gives each company a star rating each year. One star is the lowest mark and means the company is urgently in need of improvement, while the highest mark is four stars, which comes with the accolade of being an “industry leader”.
Companies are judged on seven metrics including drought resilience and transparency over sewage spills: if they score highly on some of these, they can get top marks even if they have spilled large amounts of human waste into England’s rivers and seas.
The reforms being considered would mean that to achieve the new highest score, companies would not be able to have a low score for sewage discharges. This metric will also be tightened, the Guardian understands, so it is harder to achieve a good score.
Sources at the EA say it plans to add at least one extra star rating in an overhaul of the rules, so no company found to be spilling sewage will be able to call itself an “industry leader” at the top of the league table and therefore escape scrutiny and justify high CEO pay.
There is unhappiness within the agency, according to the sources, that those at the “top of the league table” boasted of their position and used it as an excuse for high pay. There is also frustration that it gets the companies good PR, allowing them to take attention off their spills because they are not a “basket case” with a one-star rating. According to the sources it was a “very poor league table for anyone in it” and even the best performers were behaving poorly, which was not reflected in the star ratings.
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The Guardian also reported last week that there could be ‘extreme anger’ if ministers fail to reform regulatory regime in the water sector. It cited sources saying the government has dismissed some of the more ambitious ideas for fixing the sewage crisis.
Options sources say have been discussed with campaigners, the EA and other stakeholders included merging Ofwat and the EA, giving Ofwat more powers and a policy prioritising environmental benefits over costs to consumers, and giving the regulators more independence from government.