Boards under scrutiny as regulators launch sewage works compliance investigation

The Environment Agency (EA) and Ofwat have launched a major investigation into permit breaches at 2,000 sewage treatment works. Companies found to be in breach of legal permits face enforcement action, including prosecution and fines of up to 10% of annual turnover for civil cases, or unlimited in criminal proceedings.

This follows reports about widespread unpermitted releases of sewage into the environment by wastewater companies and, a joint Defra/Ofwat/EA statement said, water companies admitting that they could be releasing unpermitted sewage discharges into rivers and watercourses on the back of new checks.

Along with Event Duration Monitors on storm overflows, the statement said the EA and Ofwat now require firms to install new flow monitors on more than 2,000 wastewater treatment works to identify what is happening at those works during the sewage treatment process itself. This will uncover whether the companies are complying properly with the conditions in their permits on the volumes of sewage they must treat before they are allowed to divert any untreated sewage to storm overflows. According to the statement: “Following this action by the EA, several water companies have now revealed that many of their sewage treatment works may not be compliant. This would mean that water companies are in breach of their permits and failing to meet their legal duties. EA and Ofwat are now looking into all water and sewerage companies to assess the scale of the problem.”

While the Environment Agency is investigating potential breaches of environmental law, Ofwat is looking at companies' compliance with their statutory duty to provide a wastewater treatment system, along with the management and corporate behaviours of water companies. Indeed, a lot of attention is being put on the knowledge and actions of boards. The statement pointed out: “Water company boards certify every year that they have the funding, management resources and systems and controls in place to fulfil their regulated activities, including to meet their environmental obligations. They must notify Ofwat if they are aware of anything that may materially affect their ability to fulfil those duties.”

Ofwat's interim chief executive, David Black, has written to companies, telling them to:

• provide full disclosure on the scale of any illegal releases of sewage;

• explain what caused them;

• explain how they monitor compliance with their obligations including their system of management and internal controls;

• set out what role the board plays in scrutinising and monitoring these actions;

• describe how boards have approached dividends and remuneration decisions in the context of environmental performance; and

• set out companies' plans and timelines to address and remedy any problems uncovered.

Black said: "We will find out what company Boards knew and when, and if there has been management failure or misreporting of data to us and to the public. If we find there has been, we will use all of our powers to hold companies to account."

Environment Agency chair, Emma Howard Boyd ,said: “Water company boards must certify every year that they have adequate resources to fulfil their regulated activities. Only now, just before new monitors are installed, have companies reported concerns over potential problems…I would like to see the levels of penalties for corporate environmental crime in England go up significantly. More attention should also be paid to the directors of companies that are guilty of repeated, deliberate or reckless breaches of environmental law. Such directors should be struck off and in the most grievous cases given custodial sentences.”

Among her comments, water minister Rebecca Pow said: “I want to see water companies spending far more on better infrastructure, and far less on payouts to shareholders.”

Chief executive of CCW, Emma Clancy, said: “It’s impossible to overstate the seriousness of this investigation. Customers pay their money to wastewater companies in good faith…Should this investigation lead to prosecutions we would want to see those fines used locally to repair the environmental harm that has been caused.”

A Water UK spokesperson said: “The water industry is committed to the best possible environmental outcomes. Water companies have been investing heavily to modernise the monitoring of sewage treatment works, and in using better modelling and artificial intelligence techniques to understand and predict any issues that might occur. Where the data identifies any problems, then action must be taken to address them.”