Why Is The Environment Agency’s Water Firm Ranking Changing?

The water industry in the UK has not had a very good 2024, and a recent change by the Environment Agency is not set to make it any better for the companies themselves, even if it could lead to better service and higher-quality water for businesses.

Over the past few months, the water industry has been strongly advocating for significant increases to water bills in order to fund major infrastructure projects, culminating in a report produced by consultancy firm Oxera on behalf of the trade association Water UK.

Besides the fact that any water bill increase is going to be highly criticised as a reward for failure, as well as how this passes the burden of improving Britain’s sewage network onto customers themselves, there is an issue of trust when it comes to where that money will actually be spent.

Several multi-million-pound dividend payments have come under scrutiny at Thames Water, the UK’s biggest water company and one drowning in £15.6bn of debt, not helped by being fined the largest amount any UK water provider ever has since privatisation began in 1989.

Whilst Thames Water is an extreme case, the issue of water companies enriching themselves at the expense of entire regions that do not have a choice when it comes to their water suppliers is remarkably common and has relied in part on a rather infamous loophole the Environment Agency is trying to plug.

Perfection Amidst Disaster

The Environment Agency publishes an annual report known as the Environment Performance Assessment, which rates each of the nine water companies in England on a scale of one star to four stars.

The star rating is based on seven key performance indicators and includes:

• Supply Demand Balance Index (SDBI).
• The use and disposal of sludge.
• How they deliver the Water Industry National Environment Programme (WINEP).
• Compliance with discharge permits.
• How pollution incidents were self-reported.
• Number of pollution incidents determined to be serious.
• Number of pollution incidents in total.

One star means a company is in need of urgent intervention to improve, whilst four stars is considered to be an “industry leader”, which is often used as a key performance indicator and target for water companies to reach, which allows them to increase bills as a reward for good performance.

The problem with a league table system such as this is when every water company is underperforming, a handful of companies still claim to be industry leaders. Two of

United Utilities, the water company for the North West that leaked raw sewage into Lake Windermere then, according to whistleblowers, wrongly downgraded the event, causing blue-green algae to appear in the area of outstanding natural beauty and turn the entire lake green.

Severn Trent Water, similarly, was fined £2m for launching hundreds of millions of litres of raw sewage into the Trent River, whilst using its four-star rating to justify a bonus for its chief executive of £584,000.

This has led to a disconnect and serious criticism of the EA for ranking companies accused or guilty of thoroughly unacceptable practices as industry leaders with the maximum possible rating.

The founder of River Action described it as “simply farcical” and the chief executive of Surfers Against Sewage called the ranking system “fundamentally broken”.

The problem is that there are a lot of critical factors that are not currently accounted for in the EPA rankings, which focus on the length of the sewer networks and not the pumping stations, treatment works, storm overflows, nutrient neutrality or net zero carbon impact.

Within the EA, according to sources cited by The Guardian, there is internal frustration as well, with companies such as United Utilities using the rankings for PR purposes and obfuscating their own environmental controversies, notwithstanding the fact that every water company is under investigation for unauthorised sewage discharge.

The EA’s reforms would include an extra star rating to stop companies from calling themselves industry leaders to justify taking money out of the company to pay higher salaries.

In addition, companies will need to have a high score for sewage discharges, with this metric being tightened as well to make it harder to acquire a good score.

The present system, by the EA’s own admission, is not working, with pollution incidents and serious pollution incidents both increasing, with several treatment sites found not to be compliant with permit conditions.

Given the myriad of issues surrounding the industry after an era of laissez-faire regulation and enforcement, time will tell if the tide is turning and a better, more responsible water industry is forthcoming.