Water chiefs lash out at Ofwat governance reforms

Water industry bosses have hit out at reforms proposed by Ofwat, the industry regulator, which they claim would force them to recruit dozens of additional directors with the cost being borne by billpayers.

Sky News learnt that Water UK, which represents all of the country's major water suppliers, has told Ofwat that its proposals stray well beyond the boundaries of the corporate governance code applied to companies in other industries.

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The trade association warned Ofwat that under one scenario outlined in its consultation paper, water companies could have to hire 58 new directors at a cost over five years of more than £23m.

Water UK's response comes at a highly sensitive time for the industry, with Andy Burnham, saying he wants to bring it under "public control" and its biggest company - Thames Water - teetering on the brink of collapse.

The industry's dire record on pollution and leakages has left it exposed to growing criticism from politicians, customers and other stakeholders, particularly after a summer period which saw the government declaring a drought across much of Britain.

In its proposals, published in July, Ofwat said that new rules would require at least half of water companies' boards, excluding the chair, to be "demonstrably independent".

"To make that independence meaningful, Ofwat is also proposing that independent non-executive directors and chairs would not be allowed to simultaneously sit on both a water company board and its parent company board, to protect against potential conflicts of interest and reinforce the robustness of board decision-making."

This has sparked concern among some industry executives about there being enough qualified people willing to serve as board members in such circumstances.

Jeevan Jones, director of regulation at Water UK said Ofwat's proposals "go well beyond the gold standard of the UK Corporate Governance Code, which the Independent Water Commission recommended alignment with, and which works for major sectors such as energy, banking and transport services".

"Implementing these proposals would force water companies to initiate a wave of board recruitment and restructuring, at cost to consumers, at the same time that the industry is rightly focused on delivering the largest investment programme in its history."

The water industry is expected to feature in Mr Burnham's Ten-Year Plan for Britain, which Downing Street has said will be published by the end of the year.

Ofwat itself is expected to be abolished in due course and combined with other water regulators following last year's review overseen by Sir Jon Cunliffe, the former Bank of England deputy governor.

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"People deserve to know that the water companies responsible for their supply and protecting their local environment are being held to increasingly robust standards of governance," he said

Helen Campbell, executive director, delivery, said: "These proposals represent meaningful governance reform, requiring companies to look hard at their boardroom structures and ensure they are in the interests of their customers and the environment."

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