Editor's letter: Thames Water's last chance saloon
Ofwat's chairman has set out a reform ultimatum for the board of Thames Water, Ellen Bennett assesses the groundbreaking move.
Jonson Cox’s unprecedented public intervention in the row surrounding Thames Water will raise eyebrows: sitting regulators do not usually comment directly on individual companies, let alone publicly call on them to adopt a far-reaching set of commitments to change. But Cox is a veteran of using public statements to shine a light on companies’ behaviour, applying pressures beyond the regulator’s direct powers and levers. In his column, published exclusively in Utility Week, he sets out how Ofwat has used those powers and levers over the past few years, knocking back a requested price rise, securing an £86 million redress package for misreporting, and £100 million for improvements to trunk mains assets.
With Thames this week announcing a £100 million dividend in the same breath as admitting to missing its leakage target, it seems the message has yet to get through. Cox will no doubt be hoping his bold public statement will leave the company with no choice but to make public commitments to reform. Certainly, as he acknowledges, the advent of new investors and a new senior management team ought to provide an opportunity for change.
Let’s be fair, there is good work going on at Thames and thousands of hardworking staff whose morale will have taken another battering with this week’s headlines. But Cox’s points are less about what happens on the ground, and more about the boardroom. The commitments he has asked the company to make are around transparency, independent governance and holding the board and senior management to account. These are messages that have been coming from the regulator for years, so Cox’s reiterating them so publicly and so directly in relation to Thames speaks of frustration that they have yet to be heard. Water companies with similarly complex, highly-leveraged structures should take note – Cox may be coming for them next.
His intervention must also be taken in its wider context. Earlier this month, the political ground beneath utilities’ feet shifted dramatically when Labour saw a resurgence on the basis of a manifesto with renationalisation at its heart. It simply isn’t good enough to dismiss this as a fluke, a failure, or a last-minute wheeze to grab votes. Jeremy Corbyn realised what many sector leaders had failed to: the public mood has turned against private utilities, and government intervention at levels that would have been unthinkable just a few months ago is now firmly on the horizon.
The shaky political pact that underpins today’s government isn’t likely to last long – and whether Corbyn’s Labour ever makes it into power or not, renationalisation is back on the political agenda. Utilities need to get on the front foot: Cox has given Thames, and the rest of the water sector, a last chance to get their own house in order. They would be well advised to take it.
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