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Water regulator Ofwat has placed Thames Water into a special “turnaround oversight regime” that will require the UK’s largest water company to overhaul its business plan and face increased supervision.
The regulator said that it was subjecting Thames Water to “heightened regulatory” measures given “our concerns over the performance of the company”.
The decision came as Ofwat approved a 21 per cent increase in average household water bills across England and Wales over the next five years, short of the amount that water companies had sought.
Under the plan, households will see their bills rise by an average of £94 between 2025 and 2030.
Since the industry was privatised three decades ago, water companies must submit business plans, including proposed increases in bills and investment, to the regulator every five years.
While the industry has caused public outcry over sewage pollution, Thames Water has become a lightning rod for anger over the sector.
In its ruling on Thames Water’s latest business plan, Ofwat said that the company can raise household bills from an average of £436 this year to £535 by 2030, well short of the £627 that the utility had sought.
Thames Water, which provides water and sewage services to about 16mn households, has spent the past year straining under a multibillion pound debt burden, higher costs and the need to upgrade its infrastructure.
Its crisis deepened in March when its shareholders backtracked from a plan to inject £500mn and branded the utility “uninvestable”.
As part of the regime introduced by Ofwat, Thames Water will be required to provide a “delivery action plan” and show how it will deliver the “necessary step change in performance”.
Ofwat chief executive David Black said: “Our draft decisions on company plans approve a tripling of investment to make sustained improvement to customer service and the environment at a fair price to customers.
The Thames Water crisis is one of the first major challenges facing the new Labour government, which has said it is keen to avoid taking the company back into public ownership.
The Financial Times reported on Wednesday that the government is drawing up legislation which will put failing companies in “special measures” with a ban on bonuses for executives of heavily polluting companies, criminal charges for the worst lawbreakers and tougher monitoring of sewage outflows.
