South West Water faces ANOTHER Ofwat probe

Pennon Group’s South West Water faces another probe from Ofwat, with the industry regulator this time sharpening its focus on the firm’s leakage performance.

South West Water, which services Devon, Cornwall, and small parts of Dorset and Somerset, was the subject of an Ofwat investigation into sewage dumping last year as regulators and policymakers faced pressure to hold companies to account for growing water pollution rates.

Ofwat said it would now probe the firm’s leakage and per capita consumption (PCC) rates, with the watchdog eyeing whether South West Water has previously shared ‘timely, accurate and complete data’.

South West Water faces second Ofwat probe in a year 

The regulator was short of detail in announcing the investigation, but it noted it had in November last year deferred a decision on South West Water’s leakage performance ‘as it sought to understand how the company calculated its reported’ data.

Pennon separately confirmed the investigation relates to South West Water’s operational performance data for the 2021-2022 financial year, adding that its disclosures had been subject to ‘rigorous assurance processes’ including ‘independent checks and balances carried out by external technical auditor’.

It said: ‘We will work openly and constructively with Ofwat to comply with the formal notice issued to South West Water as part of this investigation.’

South West Water services Devon, Cornwall, and small parts of Dorset and Somerset

Around 20 per cent of water running through pipes in England and Wales is currently being lost to leakage, according to the regulator, which has identified this an issue of growing importance amid population growth and climate change. 

Ofwat investigates water companies when it believes there may be a breach of standards.

Enforcement action for breaches of licence conditions and requirements under the Water Industry Act 1991 can include issuing an enforcement order to bring a company back into line, and financial penalties of up to 10 per cent of a company’s turnover.

Ofwat sets performance targets for companies on leakage and PCC, and companies are assessed annually with the potential to be penalised or rewarded.

David Black, Ofwat chief executive, said: ‘We are committed to holding companies to account for performance and for sharing timely, accurate, and complete data with us and their customers. We want to ensure that is the case here. 

‘A thorough investigation will now be carried out and we will provide updates in due course on our findings and whether there is any further action Ofwat needs to take.’

Pennon shares slipped 3.1 per cent in early trading to 796.5p, brining 2023 losses to around 12 per cent.  

It comes at a time of fierce criticism of the British water industry, with firms under fire for sewage dumping, leakage and their handling of regional droughts.

It has led to household water bills going up this year to pay for water firms’ £10billion investment in cutting sewage pollution. 

Pennon investors have been focused on the group’s handling of drought in the south west in particular, as regulatory scrutiny among the issues driving a surge in short-selling interest late last year.

Another pressing concern is public and regulatory scrutiny of the group’s environmental credentials, particularly with regard to sewage dumping.

Untreated sewage dumping happens at times of heavy rainfall, when capacity is breached and companies are forced to release pressure on treatment facilities to stop overflow. Water companies are licenced to dump sewage under certain conditions, but there are growing concerns limits may be being illegally breached.

This post first appeared on Dailymail.co.uk