Committee publication · Correspondence · 1 April 2025
Correspondence from Ofwat regarding investigations into water companies in England and Wales, dated 25 March 2025
From: Environment, Food and Rural Affairs Committee
Inquiry: Reforming the water sector
Summary
Ofwat's 25 March 2025 letter to the EFRA Committee outlines its enforcement approach and resourcing for water company investigations since 2015. It reports 13 open cases (9 strategic wastewater cases), with case resolution typically taking 1–2 years. Since May 2023, Ofwat has tripled enforcement capacity to 17 FTE staff plus specialist support, enabling it to manage a fourfold increase in cases. The letter includes a comprehensive annex detailing 24 investigations opened since 2015, with outcomes including penalties, customer compensation, and investment commitments.
Key findings
- Since May 2023, Ofwat has tripled enforcement capacity (now 17 FTE core team plus legal, economic, financial and engineering support) to manage a fourfold increase in open cases.
- Nine strategic wastewater cases are currently open; five exceed the 24-month HMT KPI due to complexity, with resolution expected in coming months. Yorkshire Water's wastewater case concluded 20 March 2025 with a £40 million enforcement package.
- Ofwat concluded 11 cases since 2015 with combined customer compensation of £366.3 million and penalties totalling £6 million (substantially reduced from initial proposed penalties via undertakings).
- Thames Water features in 6 investigations (5 concluded, 1 open on dividend compliance); Southern Water incurred £123 million customer bill rebates for misreporting and operational failures.
- Cases are resolved through formal enforcement orders or Section 19 undertakings, with mandatory 21-day consultation before final decision. Ofwat is currently consulting on revised enforcement guidance.
Tone
FactualTopics
Key actors
Ofwat, David Black (Ofwat Chief Executive), Alistair Carmichael (EFRA Committee Chair), Thames Water, Southern Water, Yorkshire Water, Environment, Food and Rural Affairs Committee, HM Treasury
Notable line
“Since May 2023, we have tripled our enforcement capacity to meet the commitment made to HMT on receipt of extra funding.”
Key Quotes
“Where Ofwat is satisfied that a company is breaching or is likely to breach an obligation in its licence or a statutory obligation Ofwat is responsible for enforcing, and unless specific exceptions apply, Ofwat has a duty (under section 18 of the Water Industry Act 1991 (WIA91)) to issue an enforcement order to secure the company's future compliance.”
“Cases typically take between 1-2 years to complete. This is comparable to the time taken by other regulators and reflects the aim set out in the HMT KPI for Ofwat completing enforcement cases which is 24 months.”
“Since May 2023, we have tripled our enforcement capacity to meet the commitment made to HMT on receipt of extra funding.”
“As part of this recruitment, we focused on capability, not just capacity – ensuring we recruit people with the right level of skills and delivering a learning and development programme to ensure all case leads have the tools to deliver cases at pace, while maintaining rigour and quality of outputs.”
Source · parliament.uk record ↗