Water Companies
The question
To ask the Secretary of State for Environment, Food and Rural Affairs, whether it is his policy that water companies in breach of their operating licence are able to continue to operate with no material sanction.
Answered by Emma Hardy
Ofwat, as the independent economic regulator, carries out its work in the manner it considers best meets its duties, including its duty to secure that water companies properly carry out their functions.
Where companies have failed to meet statutory or licence obligations, Ofwat is responsible for enforcing. Ofwat have the power to take action through an enforcement order or financial penalty (up to 10% of a company’s relevant annual turnover).
The ultimate enforcement tool is an application for special administration. The Secretary of State, or Ofwat with the consent of the Secretary of State can apply to the High Court for a special administration order. The High Court can only make a special administration order in certain circumstances, including where it is satisfied that:
- There has been or is likely to be a contravention of a principal duty (i.e. The general duties under sections 37 and 94 of the Water Industry Act 1991) or
- an enforcement order where, in either case, it is serious enough to make it inappropriate for the company to continue to hold its appointment or licence; or
- the company is or is likely to be unable to pay its debts.
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