Outgoing Ofwat chair warns high inflation impacts could threaten water legitimacy

Ofwat chair, Jonson Cox, has warned water companies to consider the legitimacy impact of high inflation which will simultaneously boost shareholder returns and customer bills.

Speaking at the Westminster Energy, Environment and Transport Forum’s water management conference last week, Cox pointed out that “inflation flatters the equity value”. He said the effect of inflation over three years modelled (admittedly crudely) could result in a 65% increase in value for water company shareholders. “What will this do to legitimacy?” he questioned, adding: “We have citizen science, I’m sure we’ll have citizen finance too”.

He paired this with the observation that as household bills rise, struggling customers could be advised not to prioritise paying their water bills because of the ban on disconnection. This is also a threat to legitimacy, and one that could be compounded by existing public concern about river health.

Elsewhere in his broadly critical speech, Cox dealt with compliance with environmental objectives, ongoing environmental challenges, financial resilience, infrastructure modernisation and WINEP underspending.