UK watchdog accuses South West Water of failing to be honest over drought projections

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South West Water, which supplies 3.5mn people with water and sewerage services in England, has been criticised by a watchdog for inadequate management and a failure to be “honest” with authorities, risking severe water shortages and environmental damage in the summer of 2022.

In a damning email sent in July to regulator Ofwat last year — and obtained through a freedom of information request by Greenpeace — the Environment Agency said the water company had not been “honest, open and transparent with regulators about their drought projections and potential risks to security of supply” in the summer of 2022. 

The utility showed “complacency” and a “lack of understanding” of its own water supply system before the drought. The company was not “drought ready”, which meant that new water sources and permits had to be considered, applied for and permitted during the drought instead of planned in advance, the email said. The fact that SWW acted “too late” posed a risk to water security in west Cornwall, it added.

SWW is already being investigated by Ofwat over the accuracy of information it provides on leakage and water consumption. It is also one of six companies being investigated over concerns that they may be breaching sewage regulations, including potential illegal discharges at more than 2,000 sewage treatment works. Last year SWW, which has 645 sewage treatment works, was fined £2.1mn by the agency for pollution offences across Devon and Cornwall over a four-year period.

SWW is owned by FTSE 250-listed Pennon, which reported a pre-tax loss of £8.5mn for the year ending March 31 2023 but increased its dividend by 10.9 per cent to £112mn. Pennon had £165mn of cash reserves on its balance sheet at March 31 2023, down from £472mn held at March 31 2020.

The concerns about water shortages referred to in the regulator’s email came during the hot, dry summer of 2022. Several regions imposed hosepipe bans and utilities risked running out of supplies as water levels in UK reservoirs hit record lows, according to previous documents released to Greenpeace by the Environment Agency. 

No new reservoirs have been built in England and Wales for three decades despite population growth. 

The agency granted SWW a drought permit in 2022 to extract more water from the Lower Tamar lake, a nature reserve on the border between Devon and Cornwall, without which a local reservoir would have emptied and “become unusable”, according to the previous documents released by the watchdog.

Experts and campaigners say the extra water that SWW took from the environment in order to keep supplies running during the drought is likely to have negatively affected protected sites and species.

SWW said in a statement: “Protecting the environment and wildlife was always a priority [ . . . ] All drought permits were issued and approved by the Environment Agency following their processes.”

The regulator argues in the emails that SWW showed “a lack of understanding of their own supply system” and points to the utility’s water-resource management plan at the time, which predicted SWW would have enough water to be able to transfer supplies to other companies; it later realised it would have a deficit.

The company has asked Ofwat if it can raise bills by 22 per cent by 2030 to an average of £584 per household before inflation. The bills would be higher without a taxpayer subsidy of £50 per customer. This was introduced by the government in 2013 as it accepted that higher bills were needed because the company served just 3 per cent of the population but had to protect about a third of the country’s coastal waters. The company predicts a surge in demand from visitors in the summer months.

SWW said in a statement: “We strongly reject any suggestion that we were not adequately prepared for the risk of drought or that we did not operate in good faith with the regulators. 

“Despite facing a once-in-a-generation drought in the South West, no customer went without water supply and we successfully maintained a robust supply of water to over 3.5mn customers and 10mn of visitors to the region.” 

It said it was “investing over £125mn in water resilience to increase resources in Devon and Cornwall by 30 per cent and 45 per cent respectively by 2025.”

Ofwat said SWW “was undoubtedly underprepared for the drought in 2022. They have since taken urgent action and have invested significantly to ensure better future resilience.”

It added: “The region is now in recovery from drought and the company must continue to closely manage its water resource position.”

The Environment Agency said: “Since the onset of drought in 2022 we, along with Ofwat, have worked with South West Water to ensure they have robust plans in place to recover from the drought and to improve the resilience of our supplies so they are prepared for the effects of a changing climate.”