Water UK and Ofwat have rejected a suggestion that the water companies have approached the regulator for a financial bailout as a result of the widening impacts of the Covid-19 emergency.
An article in The Sunday Times newspaper yesterday said that Water UK had called on Ofwat for support in the face of a “rising tide of cash-strapped households and businesses” who were cancelling their direct debits or defaulting on bill payments.
According to the article, the water companies are also seeking leniency on leakage targets and financial leeway, including the ability to earn a higher rate of return, to “claw back the impact of surging customer defaults.”
“The plea for support comes at a time when the relationship between suppliers and the watchdog is toxic, due to a war over their spending plans”, the article says.
A spokesperson for Water UK, the trade body which represents all the UK water companies, said the story published in the business section of the newspaper is inaccurate, commenting:
“The Sunday Times story is wrong. We haven’t asked the Government for a financial bailout; we don’t want one – and we certainly haven’t lobbied Ofwat about it.”
“Our overriding focus at the moment is to ensure water and wastewater operations remain completely reliable.”
“We are going to unprecedented lengths to support hundreds of thousands of household customers with their bills, as many are now in difficult financial circumstances.”
In recent weeks the water companies have been taking a proactive approach to helping households in difficult circumstances as a result of the coronavirus crisis.
Ofwat Chief Rachel Fletcher wrote to the Chief Executives of the water companies on 19th March to set out the regulator’s expectations of how they should support vulnerable customers and assist retailers facing immediate cash flow constraints.
Fletcher praised the work of the companies to date, saying:
“It is clear from conversations over recent days that all water companies are working extremely hard at the absolutely critical work of providing customers with reliable water and waste services, while protecting their employees’ welfare as the UK contends with the effects of COVID-19.”
The letter also acknowledges that in the face of significant staff shortages and limitations to the sector’s ability to undertake some routine work due to social distancing requirements, this may make it “difficult for every company to meet some of the performance commitments in the regulatory settlement.”
“In this situation and for the avoidance of doubt, incentives and penalties in our regulatory regime should not get in the way of effective prioritisation in the interests of customers”, the letter says.
Commenting on The Sunday Times article, a spokesperson for Ofwat said:
“We have not had any requests for financial bailouts. We are in active discussion with companies to monitor the situation and companies’ resilience, and to consider the impact on customers, as well as any implications for the regulatory frameworks. For now though, the important thing is that companies work hard to maintain services and support customers and we see examples of them doing just that.”