United Utilities Group PLC (LSE:UU.) is at the heart of a legal challenge against Ofwat, with environmental group River Action accusing the regulator of unlawfully passing the cost of long-term industry failings onto customers.
The group plans to file a legal claim against the regulator this month, it said in a statement, arguing that average 36% bill increases approved by Ofwat in recent months could be used to rectify infrastructure issues that should have been addressed years ago.
River Action contends that this approach could result in customers effectively paying twice, as regulations state that the public should not bear the cost of bringing water companies into compliance with their existing permits. These rules include limits on raw sewage discharges and requirements for properly functioning treatment works.
The legal challenge specifically targets funding allocated to United Utilities for wastewater treatment works and pumping stations in the Lake Windermere area.
River Action claims that Ofwat has allowed the company to use funds earmarked for future projects to remedy past infrastructure failures.
There is no suggestion that United Utilities has acted unlawfully.
Emma Dearnaley, head of legal at River Action and previously legal director at the Good Law Project, said: “We believe Ofwat has acted unlawfully by approving funds without ensuring they are spent on genuine improvements to essential infrastructure. Instead, this funding is being allowed to cover up years of failure.”
Ofwat is already investigating multiple water companies over potential breaches of their operating permits, alongside an ongoing criminal inquiry by the Environment Agency.
“Ofwat has signed off on a broken system where customers are being charged again for services they have already funded. The cost of fixing the UK’s crumbling water infrastructure should fall on the companies and their investors, not on the British public.”
River Action has appointed a top litigation lawyer and legal campaigner, marking a new phase in its mission to restore the health of UK rivers by holding polluters and government agencies accountable.