River Action has been granted permission by the High Court to proceed with a legal challenge against water sector Ofwat for a full court hearing to challenge the approach the regulator took when it set the amounts that water companies can charge their customers at the 2024 Price Review.

The campaign group argue that Ofwat’s approach was unlawful and, as a result of regulatory failings, the financial burden of water industry infrastructure neglect has been pushed onto customers – rather than those responsible.

Announcing the legal go-ahead, River Action said:

“At the heart of the case is Ofwat’s 2024 Price Review (PR24), which approved above-inflation water bill increases, including an average annual rise of £123 per household, without guaranteeing that money will be spent on new infrastructure rather than plugging the gaps left by decades of underinvestment.”

The legal challenge follows investigations by campaigners Matt Staniek and Windrush Against Sewage Pollution (WASP), which exposed chronic sewage pollution in the Lake Windermere area and regulatory failings around PR24.

While the claim focuses on the PR24 determination for United Utilities in relation to water works in and around Lake Windermere, River Action thinks it exposes fundamental failures in Ofwat’s approach – with national implications.

According to River Action, Ofwat has forced customers to pay twice for water industry failures – and the NGO is calling for urgent regulatory reform.

“Customers are being forced to pay twice”

River Action argue that the regulator’s decision allows water companies, such as United Utilities, to charge customers twice: first for water bills that should have covered infrastructure maintenance and then again through new price increases aimed at fixing the same problems.

In August 2024, United Utilities was granted “enhanced funding” to upgrade sewage treatment works around Windermere. The approval came despite evidence submitted to Ofwat showing over 6,000 hours of raw sewage discharges in the lake in a single year. “Ofwat ignored this data in favour of hydraulic simulation modelling, which fails to reflect on-the-ground conditions,” River Action says.

Legal grounds: flawed modelling, weak enforcement

The High Court has granted permission to proceed with the legal challenge on three grounds. Represented by law firm Leigh Day, River Action will argue that:

• Ground 1: Ofwat approach to its own “not paying twice” policy was unlawful because it relied on theoretical hydraulic simulation modelling instead of the reality on the ground as seen in evidence provided to Ofwat.
• Ground 2: Ofwat lacks a meaningful clawback mechanism if water companies misuse funds.
• Ground 3: Ofwat failed to conduct legally adequate investigations into whether its approach is adequate.

A broken system that needs reform

River Action’s Head of Legal Emma Dearnaley said:

“We are delighted the High Court has said we can take our case to court. This is about the British public not paying twice for the consequences of water companies failing to invest in infrastructure. That is quite obviously fair and right, yet Ofwat’s approach gives rise to serious concerns that its promise has not been kept.

It also raises important and timely questions about whether Ofwat is fit for purpose….We must have robust regulators who are up to the task of holding water companies to account.”

Ricardo Gama, partner at Leigh Day, added:

“It’s important that when public bodies tell the public they will do something, they actually do it. Ofwat said again and again that customers would not have to pay to sort out issues which should have been fixed decadeas ago and which are leading to permit breaches by water companies.

But the documents which Ofwat have sent to us appear to show that they haven’t actually checked that the money won’t be used in this way.”