The largest water supplier in the UK, Thames Water, has been slammed with a record fine by the regulator Ofwat.
Following the “biggest and most complex” inquiry by Ofwat, the business was fined £122.7 million.
According to Ofwat, the corporation and its shareholders will pay the penalties instead of the customers.
Here’s a breakdown of why Thames Water was fined.
Why was Thames Water fined?
The fine comes after two investigations concerning its dividend payments and wastewater operations.
Thames Water has been fined £104.5 million, or nine per cent of its entire revenue, for violating wastewater regulations, slightly short of the 10 per cent turnover cap that Ofwat could have imposed.
A further £18.2 million penalty will be paid for violations of the dividend payment regulations.
According to Ofwat, its examination of the business's management of its wastewater network and treatment facilities “uncovered failings that have amounted to a significant breach of the company’s legal obligations, which has caused an unacceptable impact on the environment and customers.”
Hundreds of wastewater overflows at Thames Water treatment plants were shown to be the result of "systemic" problems.
More than 70 per cent of Thames Water's storm overflows spilled 20 times or more in 2021 alone, with nearly 30 per cent spilling 60 times or more.
The inquiry found that Thames Water had not proven that the leaks were caused by extraordinary events or that cleaning up the spills from these storm overflows, which had been occurring since at least 2017.
“Thames Water has failed to demonstrate that these spills resulted from exceptional circumstances, or that it would have been excessively costly to address the spills from these storm overflows,” the investigation said about the spills, which had been occurring since at least 2017.
Ofwat chief executive David Black said: “This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment.
“Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations.
“The company also failed to come up with an acceptable redress package that would have benefited the environment, so we have imposed a significant financial penalty.”
It comes as Thames Water, which provides services to 16 million consumers in London and the South East, narrowly avoided being effectively nationalised after obtaining an emergency £3 billion loan.
The company has now got a debt of over £19bn.
A Thames Water spokesperson said: “We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows.
“The dividends were declared following a consideration of the company’s legal and regulatory obligations. Our lenders continue to support our liquidity position and our equity raise process continues.”
What do the fines mean for Thames Water’s future?
Thames Water's five-year financial plans did not account for these fines.
Chris Weston, the chief executive of the corporation, stated at a recent meeting of the Environment, Food, and Rural Affairs select committee that Ofwat's leniency with fines was essential to Thames Water's survival.
A Thames Water spokesperson revealed in a statement: “We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows.
“The dividends were declared following a consideration of the company's legal and regulatory obligations. Our lenders continue to support our liquidity position and our equity raise process continues.”
