Environment Agency to apply 40% discount to enforcement levy for 2025-26

The Environment Agency (EA) is to apply a 40% reduction in 2025-26 to the total levy charged to water companies for enforcement. From 1 April 2026, it will recover full costs.

That was confirmed in the EA’s response to its May consultation on imposing an enforcement levy on the industry. The watchdog said the discount was in keeping with expected costs this year as it transitions to the full enforcement operating model. In all other regards, the EA will proceed as per the consultation.

The cost of prosecutions, civil sanctions, investigations, bringing proceedings and digital enforcement tools have hitherto been funded by government Grants in Aid.

The levy will be an annual charge rising with inflation, paid by sewerage undertakers and New Appointments and Variations, in addition to annual discharge permit charges. It was calculated to raise around £21m in 2025/26, but with the reduction this should come down to £12.6m in the first year.

Unlike enforcement fines and penalties, the cost of the levy can be passed on to customers. That would cost an average 60p per household per year, although the impact would vary between companies.

The EA acknowledged this would add to bills and has not been budgeted for in AMP8 business plans. It said: “Our cost recovery power only allows us to recover costs from water companies and does not mandate these costs are passed directly onto customer bills. All water and sewerage companies may consider engaging with Ofwat to explore if costs that were unknown at the time of price controls being set could be addressed in line with Ofwat processes and guidance.”