Ofwat has proposed a £24m enforcement package following its findings that South West Water has failed to meet it legal obligations in managing its wastewater treatment works and network. These failures resulted in the company spilling wastewater to the environment when it should not have done.

This announcement represents the next stage of Ofwat’s largest and most complex set of investigations into all water companies and their management of their wastewater treatment works. It follows the conclusion of cases against Yorkshire Water, Thames Water and Northumbrian Water earlier this year that resulted in enforcement action worth more than £160m.

Photo: Valentina Sotnikova

Ofwat’s investigation found that South West Water has failed to build and operate its wastewater treatment works and sewer networks to ensure they performed sufficiently. The company did not have in place adequate management systems to ensure it was meeting its legal obligations in this regard, including adequate oversight from its senior management team and Board.

In stepping up to acknowledge what has gone wrong and how it will put things right, South West Water has proposed a £24m enforcement package which includes:

• Investing £20m during 2025-30 to reduce spills from specific storm overflows. This investment will target overflows in environmentally sensitive areas or within focused community areas.
• Establishing a £2m local fund to tackle sewer misuse and misconnections, which can contribute to environmental pollution.
• Providing £2m of funding through a Nature Recovery Fund to support environmental groups in delivering local environmental improvements.

In addition the company will commit to taking the necessary steps to address the failures Ofwat has identified, securing its future compliance.

Lynn Parker, Senior Director for Enforcement at Ofwat, said: “Water companies should be in no doubt that they will be held to account if they fail to meet their legal obligations to customers and the environment. Our investigation found a range of failures in how South West Water has gone about managing its wastewater business. That is why we have secured the £24m package and a commitment to put things right.

“As we continue to progress our sector-wide investigation, we are pleased that companies like South West Water are stepping up to acknowledge their failures and to put things right. We will continue to monitor the company to ensure that this work is carried out as quickly as possible so that customer confidence can begin to be restored.”

South West Water has taken already taken some steps to address its compliance issues. These include investment to investigate and improve the operation of a range of its treatment works and storm overflows, and the introduction of new governance arrangements to ensure greater oversight of its compliance with its environmental obligations.

A consultation is now to the public and stakeholders to offer any final comments on Ofwat’s proposed decision before it is finalised. The consultation can be found here.

Former water utility boss says water firm dividends were “criminal”

The former chief executive of Wessex Water said investors stripping cash from water firms was “criminal” at a conference debating the future of the sector. He argued that privatisation helped to get debt off the Government’s balance sheet and boost investment but this changed when the “wrong sort of investors” began stripping cash out of companies through high dividends.

Ministers have promised a “fundamental reset” following years of companies paying out large dividend that diverted money away from infrastructure investment and maintenance, leading to sewage pollution and rising bills.

Should nationalisation be on the table?

However, the government have ruled out nationalisation and instead are focusing efforts on tightening rules, increasing investment and strengthening penalties within the current system of regulated private firms. Colin Skellett, who led the south-west England utility from 1988 to 2024, also argued against nationalising water companies because of the industry requiring “continuous levels of investment”.  He believes “the problem with public ownership is the Government always has other things it wants to spend its money on”. He argues “it’s not so much about ownership, it’s more about how you regulate it, how you control it, and how you make sure the investment continues.”

In contrast, Ewan McGaughey, professor of law at King’s College London, said 90% of countries and cities around the world have water in public ownership and cited examples such as Berlin and Paris, which brought their sectors back into public ownership in 2013 and 2009 respectively after the privatised model failed. Professor McGaughey argued that the Government should take away licences from failing water companies and transition them into a long-term sustainable model of public ownership, calling privatisation in England a “broken model”.