I find it interesting that Thames could potentially be fined so much (£104m) by regulator Ofwat “as a result of its contraventions of the Urban Waste Water Treatment (England and Wales) Regulations 1994, section 94 of the Water Industry Act 1991 and Condition P of its Licence” with regard to the very longstanding challenges of combined sewer overflows for stormwater discharges (they were designed to do just that one hundred or so years ago) and for un/poorly treated sewage discharges from wastewater treatment works.
When:
“2.46 The Environment Agency required water companies to install Event Duration Monitors (EDM) on all storm overflows by December 2023”
“2.49 The required instrumentation [ U_MON3 & U_MON4], and any associated civil engineering works, at many WWTW were included in the Water Industry National Environment Programme (WINEP) for companies to deliver, and funded within the allowances companies are allowed to recover through customer bills following Ofwat's PR19 price review process. The investments were defined with reference to the WINEP driver codes given below and expected to be delivered on or before March 2025.”
“2.50 As set out previously, the majority of WWTW have a TDV meter”. (where is the data 'set out previously' - I can't see/find it)
“3.125 It also told us, however, that while it began installing EDMs during AMP6158 issues with the installation of these monitors meant that it could not rely on the accuracy of the data from a significant number of its sites. These issues were identified in Autumn 2018 and were ultimately found to have been caused by a new capital delivery model.”
“4.51 We recognise that Thames Water did not underspend on its wastewater activities relative to its allowance under the price review for AMP6.”
“4.66 It is clear from the evidence we have seen that Thames Water did not have a clear view or understanding about the state of its wastewater assets; about how these assets were actually performing; and, therefore, about whether its WWTW and the networks supplying those sites were being managed and operated in a manner which was compliant, not only with environmental permits, but also with the company's overarching obligations under the UWWTR and section 94 WIA91. These are not the actions of a reasonable company.”
So, the regulators have taken over thirty years since 1989 to require & fund the privatised companies to install sophisticated monitors, both of these 'contractually' due only within this AMP7 period (to March 2025), the period for which Thames is potentially to be fined over £100m for not delivering effectively, and apparently, for not having asked nicely for additional funding mid-AMP. And this level of sophistication in data and data analysis would, almost certainly, have been required by Ofwat to have sufficient data to accept as being good enough justification for allowing additional investment in sewerage and WWTW in previous price reviews - otherwise, surely, additional capex would have been refused for 'not having a clear view of understanding about the state of its wastewater assets’?
And all this as Thames, through the separate Thames Tideway, is completing their £5.4 billion ($6.75 billion) scheme to manage combined sewer overflows in London.
Notwithstanding the challenges of Thames and its various owners, particularly in the extent of the gearing up - which Ofwat allowed/enabled/incentivised whilst simultaneously, for a while, allowing for a significantly higher than necessary WACC, and notwithstanding the challenges of managing a behemoth like Thames and the apparent inability of its middle management to get themselves heard through the fog of a regulatory game, particularly when their 'new capital delivery model' was not performing effectively, it might appear to some observers that this level of fine on Thames 'is not the actions of a reasonable regulator'?
It is rather the action of a regulator who wants to protect themselves politically when they allowed too much 'financialisation', a decade previously, hence the political storm over dividends, whilst letting down the service delivery arms of the companies by restricting funding for needed enhancement, extension and rehabilitation of much too old assets in order to restrain needed tariff increases, hence the political storm over leakage, CSOs and WWT. Hhhmmm
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