MPs announce inquiry into water industry regulation

The environment, food and rural affairs committee will examine how well water companies serve customers and the environment and whether regulatory penalties encourage responsible behaviour. The committee will also ask if the industry is doing a good job of increasing water supplies while reducing demand and will look at the scope for innovation.

UK water companies have been criticised for paying out earnings to their management and owners while underinvesting in service and infrastructure. The Labour opposition has said it will take their operations back into state control if elected.

The companies are also under pressure from Ofwat, the regulator, to make bills affordable, improve service and cut out waste. In January Goldman Sachs said water company dividends would be hard to sustain while meeting Ofsted’s requirements.

Neil Parish, the Conservative MP who chairs the committee, said: “As the UK’s population increases and the impact of climate change becomes more apparent, pressure will be put on water resources and the industry’s ability to provide a reliable and safe supply of water to commercial and domestic consumers.

“Our inquiry will scrutinise this essential industry closely and, where necessary, lay out the steps necessary to resolve any issues that are identified”.

The industry has already caught the idea of Parliament’s work and pensions committee. Frank Field, who chairs the committee, wrote to Ofwat in March asking what influence it had over executive pay, dividends and pension funding at water companies.

Shares of all three publicly traded water companies fell. At 11:13 BST, Severn Trent was down 0.5% to 1,988.5p, United Utilities fell 0.8% to 763p and Pennon dropped 0.7% to 705.8p.