Recommendation 33

HM Government · verbatim extract Not Addressed

Ofwat welcome the committee’s recommendation and want to see serious pollution incidents reduced to zero by 2030. Serious pollution incidents are not acceptable, and Ofwat have taken action to incentivise the reduction of such incidents and will continue to do so. The Government’s revised Strategic Policy Statement for Ofwat includes an expectation for Ofwat to ‘challenge water companies to demonstrate how they will achieve zero serious pollution incidents by 2030’ which will provide a clear signal to companies of the importance of achieving zero serious incidents. All water companies have reduced the number of pollution incidents following directions from the Environment Agency in 2013, and our introduction of outcome-based regulation in 2015. We have seen the number of pollution incidents reduce from the peak in 2012 and all companies delivered reductions in pollution incidents over the 2015–20 period, with a sector average reduction of 36%. In addition, Ofwat expect a further reduction of 30% over the 2020–25 period. In 2020, while some companies exceeded these expectations, South West Water’s and Southern Water’s performance was extremely poor and these two companies were responsible for over a third of the incidents reported by the sector, which is disproportionate to the size of their operations. For their underperformance on pollution incidents, South West Water will return £13.8 million to customers while Southern Water will return £7.7 million. If these companies do not improve, the amounts they will have to return to customers will progressively increase year on year. As companies reduce the number of total pollution incidents, we tend to see the number of serious pollution incidents fall as well. For instance, United Utilities reduced pollution incidents by 55% between 2012 and 2021. Of these, there were five serious pollution incidents in 2012, but United Utilities have seen progressive reductions, reporting zero serious pollution incidents in 2019 and 2020. Ofwat expect all companies to similarly progressively reduce total pollution incidents, reaching zero serious pollution incidents as soon as possible. Ofwat have also been working closely with stakeholders on reducing pollution incidents through, for instance, the Water Investment Nature Environment Programme (WINEP), drainage and wastewater management plans (DWMPs), and the Storm Overflows Taskforce. Ofwat will need to consider carefully how best to support the proposed outcome in this recommendation. At this point, Ofwat consider that strong financial incentives are likely to be the best means of achieving zero serious pollution incidents rather than amending company licences. Ofwat are working closely with the Environment Agency to ensure that any pollution targets that are included in our price review for the 2025–30 period complement the Environment Agency’s existing regulatory framework and are looking at the interactions between our regulation and the legal action that the Environment Agency can take.