Former Minister rips into Dwr Cymru Welsh Water over regulatory failures

Martin Shipton

A former senior Welsh Government Minister has strongly criticised Dwr Cymru/Welsh Water over a series of infringements, saying “it takes some doing for a company to fall foul of all four of its regulators and scrutiny bodies”.

During the first decade of devolution, Andrew Davies held a number of portfolios, including Chief Whip and Minister for Assembly Business, Enterprise Minister and Finance Minister.

Last week, after criticising the high salaries of executives at DCWW and its high water bills, Mr Davies met the company’s chief executive Peter Perry.

Following the meeting, which he described as “cordial”, the ex-Swansea West Welsh Labour Assembly Member told Nation.Cymru: “Not only has Ofwat [the water industry regulator] accused it of ‘misleading’ its regulators and customers and ‘fined’ it £40m, it has categorised Welsh Water as a ‘lagging company’ and has now done done so for three years running. “Natural Resources Wales has dropped its rating for DCWW from 4* to 2* and the Drinking Water Inspectorate has put Welsh Water in special measures for the poor quality of its water.

“And Moody’s [the credit rating body] has put DCWW’s credit rating ‘on review for downgrade’, clearly as a result of the company’s poor performance as well as that of the water industry more generally.”

‘Deterioration’

Moody stated: “On November 13 we placed Welsh Water’s ratings on review for downgrade, as part of a number of negative rating actions following a deterioration in the sector’s business risk profile….In addition, credit quality is constrained by demanding performance targets in Welsh Water’s draft determination for the upcoming price control period, in particular regarding leakage, which if carried through to the final determination will lead to significant penalties.”

Mr Davies said: “The Board of Welsh Water appears a classic demonstration of Margaret Heffernan’s Wilful Blindness, with an organisational culture which is complacent, insular, defensive and in denial.

“The failures of the board of Welsh Water and its management indicate a company that has been complacent; not strategic enough; does not understand the company’s assets; has not worked at pace and with no urgency and not carried out the maintenance required, etc.”

Lagging

Ofwat said DCWW was lagging behind on seven of the 12 performance indicators – leakage, per capita consumption, supply interruptions, drinking water quality, mains repairs, pollution incidents, and water treatment works.

On Leakage

* DCWW has had rising levels of leakage each year of 2020-25 period to date.

* In May 2023, Ofwat found Welsh Water had misreported leakage data for 2020-21 and 2021-22, and for part of the 2015-20 period.

* Ofwat Chief Executive David Black accused Welsh Water of “misleading regulators and customers” and Ofwat “fined Welsh Water £40m.

Supply Interruptions

* The company has failed to meet its Performance Commitment Level every year of the current period.

Drinking water quality

* Water quality worsened in 2023-24 and the company failed to meet the Performance Commitment Level in every year covered. The Drinking Water Inspectorate has Welsh Water the worst performer and Hafren Dyfrdwy the third worst on aspects of water quality such as discolouration, taste and odour

Mains repairs.

* Welsh Water failed its mains repairs and treatment works Performance Commitment Levels.

Per Capita Consumption

* Welsh Water’s three-year average remains higher than the 2019-20 baseline.

Natural Resources Wales

In Wales it was only after several years of clear evidence of increased pollution and reduced biodiversity of water courses that Natural Resources Wales finally downgraded its overall Environmental Performance Assessment (EPA) of Dwr Cymru Welsh Water from its ‘Industry Leading’ 4-Star status in 2021 to two years at ‘Good Company’ 3-Star status to

‘Requires Improvement’ 2-Star rating in 2023. Given its record over sewage spills since 2020 many thought its downgrading long overdue.

According to the NRW’s annual review, in 2023 out of the seven EPA metrics, Welsh Water achieved red status for two EPA metrics, amber status for three EPA metrics and only green status for two EPA metrics.

The Annual Review stated: “It highlights the worst performance from Dŵr Cymru Welsh Water against the metrics measured against, which are standardised in England and Wales. The company was responsible for a total of 107 sewage pollution incidents during 2023. The number of serious pollution incidents rose from five to seven, including a major incident involving a burst sewer pipe on the River Taff at Pontypridd in March last year. The report also flags concerns about a small but significant decline in water discharge permit compliance, dropping to 98%. While Dŵr Cymru Welsh Water will stay at two-star (company requires improvement) rating this year, NRW has issued a stark warning to the company that it needs to turn the tables on its downward performance trends.

‘Pressure’

Clare Pillman, Chief Executive of NRW said: “Despite increased pressure from ourselves as regulators, and from politicians and the public, Dŵr Cymru Welsh Water have failed to make the kind of improvements we want and expect to see. It is unacceptable that we are now seeing a year-on-year increase in significant pollution incidents, at a time where so much is being invested in improving our rivers and water quality for nature and people.”

In 2022 Dwr Cymru Welsh Water had:

* the largest number of sewage overflows – 81,937.

* the longest period of sewage discharges – 573,201 hours.

* the second largest number of different locations – 1,831.

Six of the ten worst affected parliamentary constituencies and two of the ten worst polluted rivers for sewage discharges in England and Wales are in Wales. Cardigan water treatment discharging untreated sewage into the River Teifi has been known about for about a decade.

‘Poor’

On customer satisfaction the Consumer Council for Water assessed Welsh Water’s performance as in the category ‘Poor’ – with 62.1 complaints per 10,000 connections – the third worst ranking of all companies.

The latest Consumer Council for Water and Ofwat’s Annual Reports show there has been a fall across the industry in customer satisfaction and an increase in complaints. As Ofwat reported: “Customer satisfaction has continued to decline for most companies in 2023-24 and is now at its lowest point since the measure was introduced in 2020-21. Companies should be taking action to improve customer satisfaction. In February 2024 we introduced a new licence condition on customer care and we are monitoring companies’ compliance with this.”

On Water Bills, Mr Davies said: “Dwr Cymru Welsh Water has consistently had some of the highest water charges of any water company in England and Wales. In December 2024 following its five-year price review up until 2030, Ofwat published its final determination on water charges and proposed the average water rises below which, if ratified, would result in Welsh Water having the equal highest average water bill of any company in England and Wales.

Priorities

A Dŵr Cymru Welsh Water spokesperson said: “As a not-for-profit company, delivering the best possible service to our customers and protecting the environment are our two main priorities.

“We take our responsibility for protecting the environment seriously but understand the concerns of our customers and we apologise when our performance falls short.

“Our business plan for 2025-2030 will see a step change in investment, with a record investment package of £4bn, with £2.5bn to improve the environment. This will improve performance and service delivery, adapt our networks to the climate crisis, and do more to protect our rivers and seas.

“We will always work to comply with the regulations set by the UK Government, Welsh Government as well as our regulators, for the benefit of our customers and communities.”

The spokesman pointed out that after revisions to charges permitted by the regulator, DCWW was now fourth equal in the league table rather than top.