Ofwat has said it will keep a “much closer eye” on the delivery of water infrastructure upgrades to ensure they provide value for money, as extra billions are pumped into improvements.
The regulator’s pledge came as campaigners challenged the skyrocketing costs of refurbishment projects, saying water firms were being allowed to “game the system”.
Windrush Against Sewage Pollution (WASP) said the increases had taken place against a backdrop of industry-wide apathy and a laissez-faire approach from the regulator.
The campaign group cited the upgrade of a sewage works in Oxford, which saw costs spiral tenfold from the initial estimate four years ago.
WASP said: “It wasn’t just the epidemic of ridiculous and unbelievably high costs that inspired WASP to investigate water company pricing, it was also the casual approach the entire industry has to adding eye-watering increases that, in the Oxford case, started at an already alarming £40m in 2021 and rocketed through £130m, £337m and now to £435m, without a credible explanation.”
The group compared the cost to that of infrastructure improvements in countries such as Denmark, where a state-of-the-art sewage works has been delivered for just £29m, despite a generally higher cost of living.
Ofwat’s approach to regulation has distorted the way companies use their funding and report their spending, WASP argued.
“The regulator’s hands-off approach to auditing and detail has allowed companies to game the system,” it said.
At the end of last year, Ofwat approved spending of £104bn for infrastructure upgrades by water companies, with the investment to be released over the next five years.
The package would include £12bn for more than 2,800 projects to reduce spills from storm overflows, £2bn to drive investment in nine new reservoirs and water transfer schemes, and £456m to replace 8,445km of water mains, it said.
The announcement came six months after Ofwat said it would cut water companies’ plans to upgrade critical infrastructure by £16bn amid public scrutiny of firms’ performance.
Responding to WASP’s claims, Ofwat said that although they will not be formally investigated, there will be greater scrutiny overall of how water upgrades are delivered in the wake of planned increases in investment.
“As part of this price-review period, we’ll be keeping a much closer eye on the delivery of upgrades and infrastructure projects because of the vast increase in investment,” a spokesperson said.
“That will include ensuring that they are value for money.”