UK environmental watchdog calls for tougher regulatory action over sewage spills

This could drive up enforcement action against water companies at a time when everyone’s focus ought instead to be on doing the work necessary to protect the environment, a legal expert has said.

The Department for Environment, Food and Rural Affairs (Defra), the Environment Agency (EA) and the Water Services Regulation Authority (Ofwat) have been interpreted to have broken environmental law by failing to take appropriate regulatory actions against companies spilling untreated sewage. The findings were announced by the Office for Environmental Protection (OEP) following an investigation.

The core issue, according to the OEP, relates to the regulatory system that allows untreated sewage discharges to take place. It clarifies that under the law, untreated sewage releases should be permitted only in exceptional circumstances, such as during unusually heavy rainfall. But “that has not always been the case”, it said.

The three public bodies are responsible for the regulation of network combined sewer overflows (CSOs) in England. The system is designed to release the overflows of the combined sewer when its capacity is reached following heavy rainfall and other emergencies. It is to prevent the capacity of wastewater treatment works from being overwhelmed, and to stop sewage from backing up and flooding properties. According to the EA there were 3.6 million hours of spills into England’s waterways in 2023 compared to 1.75 million hours in 2022.

The OEP has sent each of the public authorities a decision notice setting out its findings and the steps that it considers should be taken to put matters right. The three public bodies have two months to respond and confirm whether they are going to take those steps. Failure to do so could result in court action.  

The OEP was set up under the 2021 Environment Act to hold the government and other public bodies to account in England and Northern Ireland.

In its decision notice to Ofwat, the OEP pointed out two failures to comply with environmental law by the regulator. The first is about failing to take proper account of environmental law with regards to duties on sewerage companies and its duty to make enforcement orders. The second one is about failing to exercise its duty under the environmental law to make enforcement orders.

However, the OEP acknowledged that Ofwat has now taken steps to address the first failure. Ofwat has recently investigated three water companies over historic sewage spills and proposed significant fines for those companies. The draft enforcement orders proposed by Ofwat are still going through the consultation process and await the results of ongoing investigations. The final outcomes of these orders will have an impact on whether Ofwat can effectively remedy the second failure identified by the OEP.

Defra has also taken steps to address the OEP’s concerns and allegations. It has carried out a consultation on updated guidance for regulators and water companies. As a result of the consultation, it has decided that new and increased compensation will be compulsory for water companies to pay to customers and businesses in the event of issues like water supply outages, sewer flooding or low water pressure. This means payments for internal flooding from sewers could double to £2,000 or more, compared to £1,000 under current rules.  

The EA has also recently carried out a consultation (18-page / 205KB PDF) to update the storm overflow assessment framework (SOAF). This framework sets out the responsibilities of water and sewerage companies and the regulators in relation to storm overflows. The EA said in the consultation paper that it wants to ensure a clear planning framework, to support the significant forward investment needed from water companies, as well as “a robust oversight and enforcement regime”.

Gordon McCreath, water industry specialist at Pinsent Masons, said: “The law and permit conditions around CSOs are susceptible to a variety of different interpretations. The OEP’s announcement does not give a full account of its reasoning but at first blush, its position gives the impression of yet more finger pointing and retribution, when the focus of all involved should instead be on funding the necessary steps to reduce spills from CSOs and protect the environment. The OEP does, however, sensibly propose that the multiple regulators of the water industry enter into formal coordination arrangements, to avoid what can sometimes be inconsistent approaches to their respective duties. That is a welcome direction towards the simplified approach to regulating the industry that seems likely to come out of the Cunliffe Review.” 

“The final determinations of Ofwat’s 2024 price review, due imminently, will be the real acid test of whether the focus of water companies can move more to fixing underlying problems, rather than responding to multiple enforcement actions,” he said.

Ofwat is expected to announce the final outcomes of its 2024 price review on 19 December. It will set price controls for water and sewerage companies for 2025 to 2030.