It’s time for Ofwat to come clean on Thames Water

In Godalming, the smell is “horrendous”, with floods backing up into drains and parents carrying children across stinking pools every time it rains.

But the stench surrounding Thames Water hangs like a cloud over their accounts as well, where the company is drowning in £17.6bn of debt – its creditors still paddling furiously as they try to hang on to as much of their cash as they possibly can.

Instead of holding them to account, it looks like the water regulator, Ofwat, could throw them a lifeline.

Last year Thames Water declared £414m profits in the six months to September, but said there was “material uncertainty” which puts it on the brink of collapse.

That’s because the company is still in discussions with Ofwat over a controversial proposal from its creditors to buy the company, so long as they can keep on spilling raw sewage into seas and rivers without paying fines for more than a decade.

We wrote to Ofwat back in November, making it clear that this kind of stitch-up shouldn’t even be considered without thinking properly about the alternatives. And right at the top of that list of alternatives is special administration. This mechanism, laid out more than 30 years ago, allows the government or the regulator to ask a court to appoint specialist administrators with power to transfer failing water companies to someone else – someone who doesn’t have to pay back all the loans. If the government puts up the money to tide the business over during the transfer, it can even put itself at the front of the queue to get the money back.

This would mean the creditors who helped Thames Water extract billions of pounds would almost certainly lose more money than if they became owners. And the people who have been funding this corporate gravy train – the people paying water bills – would get a company which can invest in the vital infrastructure that Thames Water has been failing to build. And all of us would get cleaner rivers and seas. There’s even a bid like this already on the table from Castle Water.

We told Ofwat that it should publish details of all the proposals and launch a public consultation, so that everyone can agree on a solution that puts people and the environment first – not Thames Water’s creditors.

Ofwat wrote back to us in December, saying that “if any proposals are progressed that require changes to the regulatory framework or the company’s licence, these would be subject to public consultation”.

But the creditors can only hang on to Thames Water if the regulator lets them off the hook on pollution. And if the regulator lets them breach the current “regulatory framework” without paying fines, that’s as good as making “changes to the regulatory framework”.

We’ve made this clear to Ofwat and asked them to confirm that they’ll be opening a public consultation in any event. So far we’ve heard nothing back.

Ofwat need to listen to Thames Water’s customers, as well as all of us who care about the natural world. It’s time for the regulator to comply with the law and consult fully on any proposal that lets Thames Water off the hook. We stand ready to hold them to account.