The water sector regulator has moved swiftly to reject comments made in an article about water privatisation published in the Financial Times on Sunday which was highly critical of Ofwat, the water companies and their investors.

The FT article described water privatisation as looking like "little more than an organised rip-off", suggesting that "bills are, in effect, rising to fund the massive shareholder payouts."

The article states:

"The regulator needs to look again at the generosity of its regime, and its cock-eyed governance. As things stand, water privatisation looks little more than an organised rip-off. Quite why this natural monopoly should not operate through not-for-profit, public interest companies is ever less clear."

Writing in response to the FT, Chief Executive Cathryn Ross, said the article had failed to recognise how Ofwat works to protect customers of monopoly water companies and that as the regulator, the customer’s interest is “central to everything we do.”

Delivering  a strong rebuttal to the UK’s leading financial news publication, Ross said:

“Contrary to the suggestions in the article, the prices that customers pay are rigorously safeguarded by Ofwat through 5-yearly price reviews. When determining price controls, we do not allow companies – including Thames Water – to pass on the costs of their financing arrangements beyond that of an efficient notionally-structured company.”

“Far from taking ‘no interest in companies’ capital structures’, as the article claims, we actively collect and analyse information on water companies to monitor their financial health and to identify any potential risks which may impact on service delivery and prove harmful to customers.”

Ofwat publishes this information annually to allow all stakeholders to compare the performance of companies across the industry.  

Cathryn Ross continued:

“We take very seriously our duty to deliver the best outcomes for customers and society and we have never shied away from holding any water company to account – our record in this regard speaks for itself.”

“We took action against Thames Water in 2014 for misreporting and secured a package worth £86 million for its customers. Following our intervention this year after a spate of serious bursts, Thames will invest almost £100 million more to improve its trunk mains assets.”

“ In June, Ofwat’s Chair, Jonson Cox, publicly called on Thames Water to make a series of changes, including demonstrating that management rewards give appropriate weight to performance for customers’ as well as financial performance, and ‘explaining transparently how those performance standards are set and assessed each year. Thames Water has now responded positively to this call, and we will be seeking changes from other companies in the same vein.”

The Financial Times’ article followed on from a BBC investigation broadcast on BBC Radio 4 last week suggesting that Australian bank Macquarie and its investors, who sold their remaining share of the utility in March this year, had left Thames Water with an extra £2 billion debt burden to be paid for by customers.

In the run-up to Ofwat’s 2019 Price Review, the UK water sector looks set to remain under the microscope.