New government, new water sector regulation

Since the outcome of July’s general election became known, the new Government has made clear on a number of occasions that it plans to implement a suite of changes to the legislative and regulatory frameworks of the water sector.

In order to keep tabs on the various announcements made since then, we have grouped at least some of them here for ease of reference.

Within days of taking power came Defra’s announcement, on 11 July 2024, of its initial steps for water sector change, outlined as follows.

After writing to Ofwat, the Secretary of State has secured agreement that funding for vital infrastructure investment is ringfenced and can only be spent on upgrades benefiting customers and the environment. Ofwat will also ensure that when money for investment is not spent, companies refund customers, with money never allowed to be diverted for bonuses, dividends or salary increases.  

Water companies will place customers and the environment at the heart of their objectives. Companies have agreed to change their ‘Articles of Association’ — the rules governing each company — to make the interests of customers and the environment a primary objective. 

Consumers will gain new powers to hold water company bosses to account through powerful new customer panels. For the first time in history, customers will have the power to summon board members and hold water executives to account.  

Strengthen protection and compensation for households and businesses when their basic water services are affected. Subject to consultation, the amount of compensation customers are legally entitled to when key standards are not met will more than double. The payments will also be triggered by a wider set of circumstances including Boil Water Notices (see further below).

During the King’s Speech on 17 July, Government announced its Water (Special Measures) Bill to cut sewage spills and attract investment to upgrade infrastructure. The proposals include:

• strengthening regulation to ensure water bosses face personal criminal liability for lawbreaking;  
• giving the water regulator new powers to ban the payment of bonuses if environmental standards are not met;  
• boosting accountability for water executives through a new ‘code of conduct’ for water companies, so customers can summon board members and hold executives to account;  
• introducing new powers to bring automatic and severe fines; and
• requiring water companies to install real-time monitors at every sewage outlet with data independently scrutinised by the water regulators. 

Speaking at the Summer Stakeholder Reception on 31 July 2024 the Secretary of State commented as follows.

I’ve set Defra five key priorities.

We will clean up Britain’s rivers, lakes and seas.

In the last few weeks, we’ve reset that relationship with the water industry with tough first measures introduced already, to start to stop illegal pollution of our waterways and a strong new partnership that is intended to bring in a massive investment in jobs that will upgrade our broken sewage (sic) infrastructure.

On 12 August 2024, Defra published its consultation on planned changes to the Water Supply and Sewerage Services (Customer Service Standards) Regulations 2008, commonly known as the Guaranteed Standards Scheme or GSS. These changes include an approximate doubling of the amounts payable as compensation for service failures, and the addition of publication of a boil water notice as a compensation trigger. Payments for the latter have been made on a voluntary basis for a number of years, but are now set to become a statutory requirement. The consultation runs for 8 weeks, closing on 7 October 2024.

It is clear that this flurry of activity to introduce new powers is far from over.