Water sector regulator Ofwat has rejected the suggestion in a recent article in the Financial Times that Thames Water customers will pay “three times over” for the costs of the Thames Tideway Tunnel.

Following the publication of a report in the Financial Times on 27 April 2024 that Thames Water customers will have paid £540 million for the super sewer for London which is due to come into full operation in 2025, Keith Mason, Ofwat Senior Director of Future Assets and Resources, including Thames Tideway has responded with the following statement:

“The assertion (Report, April 27) that the Thames Tideway Tunnel project “makes consumers pay three times over” — which is made by one of those you interviewed for the piece “Thames Water customers pay £540mn for London’s ‘super sewer’” — is incorrect.

“They pay only once for this £4.5 billion asset; the cost being spread over the lifetime of the asset — much like the mortgage on a house.

“Like mortgage payments, Thames Water’s current and future customers have in the past and will in the future contribute to the cost of financing the delivery of the Thames Tideway Tunnel (including a return on the capital provided by lenders and shareholders). This cost of capital is regulated and was competitively determined in 2015 and fixed up to 2030. Moreover, at 2.497 per cent the weighted average cost of capital was comparable to, or lower than, for other utilities despite the greater risk.”

The Financial Times article cited David Hall, visiting professor at Greenwich University who calculated the £540 million figure, as saying the project “makes consumers pay three times over”.

“First they are paying almost £0.5bn up front, more than all the equity invested by Thames Tideway’s shareholders, then they are paying for the returns of shareholder loans, and then from continuing debt.”