Profits And Pollution

"S&TC has for a long time questioned the English water companies over their abstraction policies, especially in water-scarce, aquifer-fed regions, but now it appears that other sectors of the industry are under scrutiny."

Paul Knight, CEO Salmon & Trout Conservation writes…..

Carry out the basic duties

In the Financial Times recently, it was reported that Southern Water Services is being investigated by the regulator, Ofwat, over allegations that it breached its statutory duties on sewage treatment.

In fact, this investigation had already been the subject of earlier FOI requests submitted by S&TC in 2018. Our investigation had required a referral to the Information Commissioner before OFWAT signalled last December that they were still investigating SWS and had been since June 2017.

OFWAT confirmed to S&TC that their investigation covered “the company’s general duty to, among other things, provide and maintain its sewerage system to ensure its area is effectually drained (Section 94 Water Industry Act 1991) and the company’s obligation to ensure it has adequate financial and management resources and systems of planning and control in place to enable it to fulfil its statutory obligations (Condition F of its licence)”.

The investigation, which covers wastewater treatment works operated by SWS, is also looking at the company’s reporting of relevant compliance information to OFWAT, focused on the years from 2010 to 2017. OFWAT is looking at whether SWS needs to make future revenue adjustments and/or pay penalties.

In short, this is all about SWS’s basic duty, to operate sewers, collect sewage and treat sewage to render it harmless. If it has failed to do this properly, in  some systematic way,  it would be shocking.

We now see that the allegations are so strong that the Serious Fraud Office could become involved.

Overwhelming Overflows

S&TC’s Riverfly Census results are showing just what a dreadful ecological state some of our rivers are in at the moment, and impact from inadequately-treated sewage is undoubtedly one of the sources of the offending pollution, together with the lack of dilution for pollutants due to excessive water abstraction.  This is especially the case in some smaller, rural treatment works, where investment has not been as great as in larger urban areas. Many of these rural units cannot cope with being inundated in storm-water events and have no option but to spill raw sewage into rivers.  Our wild fish stocks inevitably suffer in such events, as does their food chain and the whole ecology of our river systems.

While water companies must be commended for the huge investment that has been made to clean up the environment since privatisation in 1989, to enable that to happen, they have accumulated some £51bn of debt, while a staggering £56bn has been paid out to shareholders in dividends - according to an analysis of Ofwat’s accounts by the Financial Times. In contrast, we note that Dwr Cymru (Welsh Water) is a not for profit company.

Profit should not be made off the back of pollution

SWS is owned by a consortium of private equity and infrastructure investors, including, amongst others, UBS Asset Management and JPMorgan Asset Management.  Between 2016 and 2017, SWS distributed no less than £190m in shareholder dividends while its treatment works continued to discharge under-treated sewage into the environment. We have to ask whether investors such as UBS and JP Morgan will ever have the best interests of our water environment as a priority, over making a return on capital?  The investigation  by Ofwat, and the possibility of the involvement of the Serious Fraud Office, suggests that those of us trying to protect our rivers, coasts and their dependent wild stocks of fish, should be very concerned indeed.

At S&TC, we now have the evidence within our Riverfly Census Report to put in front of decision makers to demand that they regulate water polluters with a great deal more zeal than they have done in the past.  In terms of water companies, that means that Ofwat must go further than merely ensuring customers pay the minimum possible for their water supplies and sewage treatment – there has to be a genuine responsibility for environmental protection. The better news is that we hear rumours of the Environment Agency getting tougher with water companies but, again, they need the resources to operate effectively.