Water Companies

Environment Food and Rural Affairs written question – answered on 4th September 2006.

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Photo of Lyn Brown Lyn Brown Labour, West Ham

To ask the Secretary of State for Environment, Food and Rural Affairs what sanctions Ofwat can impose on water companies which fail to meet leakage targets; and whether he has discussed possible sanctions against Thames Water with Ofwat.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

To ask the Secretary of State for Environment, Food and Rural Affairs what penalties are in place for water companies which fail to meet their leakage reduction target; and if he will make a statement.

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

To ask the Secretary of State for Environment, Food and Rural Affairs what recent assessment he has made of the extent to which the Water Services Regulation Authority (Ofwat) is adequately fulfilling its statutory remit in respect of all water companies, with particular reference to Thames Water; what measures he is able to take to ensure that it does so; and if he will make a statement.

Photo of Ian Pearson Ian Pearson Minister of State (Climate Change and the Environment), Department for Environment, Food and Rural Affairs

Ofwat is responsible for setting leakage targets and has powers to deal with poor performance.

Should Ofwat conclude that the failure of a water company to manage leakage constitutes a failure of the duty under section 37 of the Water Industry Act to maintain an efficient water supply system, it has two options for regulatory action. It has powers to initiate enforcement action under section 18 of the Water Industry Act to require the water company to take specified steps to reduce the level of leakage. Since April 2005, it also has powers to impose a financial penalty under section 22A of the Water Industry Act.

I have discussed with Ofwat the issues of leakage and enforcement options available, but Ofwat is independent of Ministers.

Following Thames Water's failure to meet its leakage, Ofwat announced it has secured a legally binding undertaking, committing Thames Water to £150 million of additional investment in replacing leaking mains. This is more than double the maximum imposable fine and will come from the shareholder, not the bill payer. Ofwat has also set revised leakage targets for the period up to 2010 to get the company's leakage reduction back on track and to take leakage down to 720 megalitres/day by 2009-10 rather than the old target of 725 megalitres/day. It is right that the consumer does not bear the burden of the increased investment needed for Thames Water to deal with its failure to meet its leakage targets.

Ofwat will closely monitor the company's progress. Subsequent failures will lead to further enforcement action, including fines if appropriate, from 2007. Ofwat will not hesitate to use its tough powers against any company that clearly fails to meet its responsibilities to consumers.

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