Thames Water was slammed by industry watchdog Ofwat on Thursday after plans to protect customers were rejected for falling short of expectations.
The UK’s biggest private water company, which supplies 15 million customers in Greater London, was one of the worst performers in an Ofwat assessment of plans to improve customer service over the next five years.
The regulator, led by Rachel Fletcher, said the water giant’s costs were 25% higher than justified and customers were at risk of poor service. It also questioned whether Thames could meet leakage reduction targets.
The rejection caps a bad year for Thames, which has faced a barrage of criticism after wild weather led to burst pipes, floods and thousands of customers without water. In December it was also fined £2 million for spilling raw sewage into the river.
Thames hit back and said the regulator was effectively asking it to slash planned investment levels of £11.7 billion over the next five years.
Chief executive Steve Robertson said: “I have to say I am disappointed and, to be honest, seriously concerned. We’re facing the challenges of leakages, infrastructure renewal, climate change and the growth of the region and that needs investment.
“We have proposed investing £11.7 billion over five years and they want us to spend 20% less.
“The Mayor, MPs, councillors, all say: ‘when are you going to increase investment and put the money in?’ This plan is about taking that first step.”
He said Thames Water had consulted with thousands of customers on the plan. It has eight weeks to resubmit the proposal. The company is thought to be committed to maintaining the investment plans despite Ofwat’s criticism.
Only three of the 17 companies who submitted spending plans were approved by Ofwat: Severn Trent, South West and United Utilities.
Another 10, Anglian, Bristol, Portsmouth, Northumbrian, South East, Wessex, South Staffs, Yorkshire, SES and Dwr Cymru, also needed further work. Thames joins Affinity Water, Hafren Dyfrdwy and Southern Water in requiring a major overhaul.
The water industry has become increasingly political after Jeremy Corbyn’s Labour party proposed renationalising the sector if it wins power. Last year shadow chancellor John McDonnell said the level of dividends taken out by water companies was “scandalous”.
