Committee publication · Correspondence · 2 September 2025
Correspondence from Northumbrian Water regarding legal fees, dated 1 August 2025
From: Environment, Food and Rural Affairs Committee
Inquiry: Reforming the water sector
Summary
Northumbrian Water responds to the Environment, Food and Rural Affairs Committee's 16 July inquiry into water sector reform. The company clarifies its dividend policy (not ruling out dividends; paid none in 2024/25 despite strong performance), reports £3.1m in legal fees for regulatory actions since April 2019, and details six regulatory investigations or enforcement actions from Ofwat, Environment Agency, and Drinking Water Inspectorate. Its legal team comprises seven professionals including one solicitor dedicated to regulatory matters.
Key findings
- Northumbrian Water has not ruled out paying dividends over the next five years, contrary to Committee's recollection of oral evidence; dividend policy allows distributions adjusted by service performance and environmental outcomes.
- Company paid no dividends for 2024/25 despite ranking first in customer services; average sector return over 2020-25 was 1.7%, below Ofwat's 4.1% base expected return.
- Legal fees for regulatory actions (prosecutions and enforcement) totalled £3.1m since 1 April 2019; company faced 6 Environment Agency interviews under caution, 2 prosecutions (2021, 2022), 1 Ofwat enforcement action, and 4 Drinking Water Inspectorate actions.
- Legal team comprises 6 solicitors and 1 legal executive (7 total), representing 10% reduction since 2010; one solicitor has particular focus on regulatory matters alongside broader responsibilities.
- Company seeking approximately £400m new equity investment from shareholders, over 90% directed at meeting statutory legal requirements set by government and regulators.
Tone
ProceduralTopics
Key actors
Northumbrian Water Limited, Alistair Carmichael MP, Environment, Food and Rural Affairs Committee, Ofwat, Environment Agency, Drinking Water Inspectorate, Competition Appeal Tribunal, Heidi Mottram
Notable line
“To clarify the position, NWL has not ruled out paying some dividends, where this aligns with Ofwat's guidance and our company policy 1 , over the next five years.”
Key Quotes
“NWL has not ruled out paying some dividends, where this aligns with Ofwat's guidance and our company policy 1 , over the next five years.”
“In line with our policy, no dividends were paid for the year 2024/25 despite NWL being one of the best performing companies in the sector.”
“These demonstrate that the average return on regulated equity across the sector over the five years was just 1.7%. This compares to a 4.1% base expected return that Ofwat set in its final determinations for the 2019 Price Review.”
“… we have incurred legal fees amounting to £3.1m in relation to such regulatory actions.”
Source · parliament.uk record ↗