River Action granted permission to proceed with legal challenge against Ofwat 

Ofwat has forced customers to pay twice for water industry failures – and we are calling for urgent regulatory reform

We are taking water regulator Ofwat to a full court hearing, to challenge the approach Ofwat took when it set the price that water companies like United Utilities can charge their customers.

Ofwat’s approach was unlawful and, as a result of regulatory failings, the financial burden of water industry infrastructure neglect has been pushed onto customers – rather than those responsible.

The case is proceeding amid intensified calls for an overhaul of Ofwat, with growing scrutiny from the Independent Water Commission, led by Sir Jon Cunliffe, into whether the regulator is fit for purpose. We are calling for a reform of the regulator and, in particular, for Ofwat to stop water companies passing the costs of failures on to the public.

Water bill hikes – with no guarantees for the future

At the heart of the case is Ofwat’s 2024 Price Review (PR24), which approved above-inflation water bill increases, including an average annual rise of £123 per household, without guaranteeing the money will be spent on new infrastructure rather than plugging the gaps left by decades of underinvestment.

The legal challenge follows investigations by campaigners Matt Staniek and Windrush Against Sewage Pollution (WASP), which exposed chronic sewage pollution in the Lake Windermere area and regulatory failings around PR24.

While the claim focuses on the PR24 determination for United Utilities in relation to water works in and around Lake Windermere, River Action thinks it exposes fundamental failures in Ofwat’s approach – with national implications.

Customers are being forced to pay twice

The regulator’s decision allows water companies, such as United Utilities, to charge customers twice: first for water bills that should have covered infrastructure maintenance and then again through new hikes aimed at fixing the same problems.

In August 2024, United Utilities was granted “enhanced funding” to upgrade sewage treatment works around Windermere. This approval came despite evidence submitted to Ofwat showing over 6,000 hours of raw sewage discharges in the lake in a single year. Ofwat ignored this data in favour of hydraulic simulation modelling, which fails to reflect on-the-ground conditions.

Legal grounds: flawed modelling, weak enforcement

Permission has been granted for all of our three grounds. Represented by law firm Leigh Day, we will argue that:

• Ground 1: Ofwat approach to its own “not paying twice” policy was unlawful because it relied on theoretical hydraulic simulation modelling instead of the reality on the ground as seen in evidence provided to Ofwat.
• Ground 2: Ofwat lacks a meaningful clawback mechanism if water companies misuse funds.
• Ground 3: Ofwat failed to conduct legally adequate investigations into whether its approach is adequate.

A broken system that needs reform

River Action’s Head of Legal Emma Dearnaley said,

Ricardo Gama, partner at Leigh Day, added: