Weekend press round-up: Ministers willing to let bills rise to keep Thames afloat 

Ministers are willing to let to bills rise to keep Thames Water afloat as it seeks billions of pounds of fresh investment to fund a turnaround. The ailing company featured heavily in the weekend papers, which also reported that Thames has hired experts at Teneo, the advisory firm that managed the collapse of Bulb Energy, to help it avoid a similar fate. The news came after several rowers in the losing Oxford team were struck down with E Coli in the lead up to Saturday’s boat race on the River Thames.  

Thames Water bills likely to rise as UK ministers try to save company 

Ministers have accepted that Thames Water bills will have to rise, as they seek to persuade investors to put more money into the troubled company and stop it sliding towards a politically disastrous nationalisation.  

Steve Barclay, the environment secretary, has told the company and the regulator, Ofwat, that he does not want to see any relaxation of the regulatory regime that would allow Thames Water to eject more sewage into rivers. But ministers admit that something has to give to stop investors walking away from the company after Thames Water shareholders this week ruled out injecting £500mn of equity.  

“We are not overjoyed about bills rising,” said one government insider close to the discussions with Ofwat and Thames Water. “But if you have to give somewhere, it would have to be on bills.”  

Thames Water has asked to be allowed to raise bills by 56 per cent by 2030, including inflation — or around £262 per household. But the Consumer Council for Water (CCW) has warned that the increases will be unaffordable for many households and there is a growing campaign calling for non-payment of bills.  

“Thames Water customers understand that investment is needed but they should not have to pay for Thames Water’s past failures. They’ve already paid a high price through the company’s poor complaints record and service levels,” said Mike Keil, chief executive of the CCW.  

Ofwat is in the process of weighing its decision, with a draft ruling expected in June when the company is expected to renew efforts to draw in billions of pounds of equity from new and existing shareholders. The company needs the bill increases to underpin any shareholder investment.  

While Barclay accepts that customers already feel they are paying too much for water, there is also widespread anger over the state of Britain’s waterways; the Liberal Democrats are putting the campaign against sewage spills at the heart of their election campaign. 

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Barclay met the new Thames Water management earlier this month and is said by colleagues to want to give them a chance to turn things around. “They seem to have a plan for doing it,” said one government official. 

Prime Minister Rishi Sunak’s business adviser Franck Petitgas has been involved in discussions to find a way out of the crisis at Thames Water, as Downing Street joins the effort to try to stop the company failing.  

Thames Water is also asking for limits to regulatory fines for sewage pollution and other failings, as the company claims they deplete cash from the business, making it harder to turn around its performance.  

Two directors, including company secretary Rachael Hambrook, quit parent company Kemble on Thursday in a sign of the water monopoly’s growing distress.  

Chris Weston, Thames Water’s chief executive, said this week the company was “a long way off” temporary nationalisation, but did not rule it out, presenting a major problem for Sunak in an election year. 

Margaret Thatcher privatised the water sector in the 1980s and the forced renationalisation of Thames Water would confirm in the minds of voters that it had been a costly failure. Michael Gove, communities secretary, this week seemed to confirm some of those doubts. “I think for years now, we have seen customers of Thames Water taken advantage of by successive management teams that have been taking out profits and not investing as they should have been,” he said. 

Neither the Conservatives nor Labour want to renationalise the sector and have to take the blame for rising bills and sewage spills or — in the case of Thames Water — become responsible for delivering water and sewage services to millions of customers.  

Rachel Reeves, shadow chancellor, said last year: “Spending billions of pounds on nationalising things just doesn’t stack up against our fiscal rules.” A government spokesman said: “We prepare for a range of scenarios across our regulated industries, including water, as any responsible government would.”  

Labour has, however, promised to give Ofwat powers to block the payment of any bonuses until water bosses have “cleaned up their filth”, the party said, adding that executives who oversaw repeated law-breaking would face criminal charges. 

Financial Times 

Thames Water hires restructuring advisers amid fears of collapse 

 Thames Water has assembled a team of City experts to lead urgent restructuring talks this week amid fears that its parent company may collapse by the end of the month. 

The crunch talks are expected to take place days after Thames Water’s investors signalled they would not put further funds into the company to secure its short-term cashflow, according to a source. 

Britain’s biggest water company is understood to have appointed experts at Teneo, the adviser that managed the collapse of Bulb Energy, amid an investor standoff that has raised fresh fears for the future of its parent company, the Kemble Water Group. Thames is also continuing to work with advisers at Rothschild to explore potential financing options for the company. 

Thames said last week that Kemble’s owners – which include the major pension funds Omers and USS, and Abu Dhabi and Chinese sovereign wealth funds – had hired restructuring advisers at Alvarez & Marsal, which oversaw the Chapter 11 bankruptcy of WeWork in the US last November. 

Teneo declined to comment. Rothschild and Alvarez & Marsal did not respond to requests for comment. 

The talks to steer a future for the heavily indebted water company, which were first reported by the Financial Times, come after Kemble’s owners pulled the plug on £500m of emergency funding amid an impasse with the industry regulator over calls to raise household bills.

The company has more than £18bn of debt and Kemble is due to repay a £190m loan by the end of this month, which has heightened concerns that the parent company could become insolvent without government intervention. 

Thames could be placed into special administration, which would result in the government stepping in and temporarily renationalising the company. It is understood that Teneo would be in line to oversee this process. The government is understood to be eager to avoid this outcome ahead of a general election expected later this year. 

Chris Weston, Thames Water’s chief executive, told BBC Radio 4 last week that special administration was “a long way off” and could be avoided if shareholders agreed to provide funds. 

Thames said it has £2.4bn of cash and access to other facilities that means it could continue operating until 2025, and that it would pursue all options to secure new investment “from new or existing shareholders”. Thames and Kemble declined to comment further. 

Sarah Olney MP, the Liberal Democrat Treasury spokesperson, accused the government of being “asleep at the wheel for years” and called on ministers to put the company into special administration. 

“Now Thames Water customers are facing the worst of all worlds, with water bills set to skyrocket while local rivers are ruined by sewage. Ministers must step in before it’s too late,” she said. “It’s time they put Thames Water into special administration and turned it into a public benefit company, to prevent customers and the environment paying the price for this calamity.” 

The Guardian  

Boat Race: Oxford rowers criticise sewage levels in River Thames 

University of Oxford rowers have criticised sewage levels in the Thames after losing the Boat Race to Cambridge. 

High levels of E. coli have been found in the river where universities race every year. 

Leonard Jenkins of the Oxford men’s team told BBC Sport he had been vomiting before the race. 

Thames Water has said improving river health was a “key focus” for the company. 

On Wednesday, Environment Agency figures revealed raw sewage spills doubled last year in England to 3.6 million hours of spills compared with 1.75 million hours in 2022. 

Within the spills are human waste, wet wipes and sanitary products which can pose a serious risk to swimmers. 

Boat race crews had been given safety advice to avoid swallowing water splashed up from the Thames. 

Cambridge, who won both male and female races, was also warned against throwing the cox into the water as is tradition. 

Speaking to BBC Sport, Mr Jenkins said: “This morning I was throwing up and I wasn’t sure I was going to be able to race. 

“It would be a lot nicer if there wasn’t as much poo in the water. 

“It’s not to take away from Cambridge, as we may not have beaten them even if we were all on top form.” 

A second member of squad said three people had to miss training sessions due to stomach bugs. 

In a statement, Oxford University Boat Club (OUBC) said: “Three members of the OUBC men’s blue boat came down with a stomach bug in the week of The Boat Race, the origin of which we cannot definitively say.” 

“These things happen in the final lead up to the race, including in years we have won,” it continued. 

Coxswain Will Denegri said: “Whether that’s related to E. coli in the river I don’t know, but it’s certainly not helped our campaign… 

“It’s not an excuse, but it definitely hasn’t helped our preparation.” 

Testing by campaign body River Action and Fulham Reach Boat Club earlier this month detected high levels of E. coli, which can cause serious infections. 

River Action said the testing locations in its research suggested the source of pollution was from Thames Water discharging sewage directly into the river and its tributaries. 

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Industry body Water UK cited record levels of rainfall but called the situation “unacceptable”. 

A government spokesperson also said sewage discharged into UK waters was “completely unacceptable and water companies need to clean up their act fast”. 

They went on to say the government is taking “tough action to hold them to account”, with “stringent targets in place” and the quadrupling of water company inspections. 

In a statement issued before the race, Thames Water said: “We have experienced higher than average long-term rainfall across London and the Thames Valley with groundwater levels exceptionally high for the time of the year. 

“The overflows are designed to operate automatically when the sewer network is about to be overwhelmed, which then releases diluted wastewater into rivers, rather than letting it back up into people’s homes. 

“We are working hard to make these discharges unnecessary and have published plans to upgrade over 250 of our sites.” 

BBC News 

Claire Coutinho considers axing £4bn of green levies from electricity bills 

Claire Coutinho is considering removing £4bn of green levies from household electricity bills, amid warnings they are making heat pumps and electric cars more costly. 

The Energy Secretary received an official report at least two months ago on the proposal including moving some or all of the levies to gas bills, or shifting them entirely into general taxation, both of which could prove controversial. 

The suggested changes have been put forward amid concerns that the weight of green levies on electricity bills are holding back progress on net zero. 

Ms Coutinho is now considering the options put forward, with the Government committed to “rebalancing” gas and electricity prices. 

Green levies – also known as “policy costs” – fund payments for renewable energy schemes, insulation programmes and bill support for low-income pensioners. 

They add about £142 to the typical electricity bill under the current energy price cap, excluding VAT, compared to just £46 to the typical gas bill. 

The difference is largely down to the fact that only electricity users pay for the renewables obligation and the feed in tariff schemes, which together cost £107. 

Ministers first pledged to shift the charges away from electricity bills more than two years ago, amid concerns that they effectively punish households for adopting electrically-powered heat pumps or battery-powered cars. 

Mass adoption of both technologies is a key pillar of the Government’s plan to reach net zero carbon emissions by 2050. 

However, shifting the levies elsewhere may prove controversial. It was previously seen as fairer to put them on electricity bills because virtually all households are connected to the power grid, whereas only around 85pc are connected to the gas grid.
 
Last month, 16 organisations, including Nationwide and energy giant EDF, called on the Treasury to scrap the levies for electrically heated homes. 

An energy industry source told The Telegraph: “The Government committed to fixing this ages ago but they’ve still done nothing about it.   

“A lot of investment is still being held back in heat pumps and electric cars because we have this crazy energy situation.” 

Adding levies on to gas bills would spread the costs among fewer households, pushing up energy bills for households connected to the gas grid by more than £20 per year according to some estimates. 

The pool of people paying would also become smaller as more people switched away from gas, potentially exacerbating fuel poverty, some experts have warned. 

That has prompted calls for the charges to instead be moved into general taxation – another change that may prove controversial given today’s historically high tax burden. 

Removing the levies from electricity bills would create a much bigger incentive for people to adopt heat pumps and electric cars. 

Energy companies including Centrica, E.On, Octopus, EDF and Ovo have backed the move and warned that the current setup creates “perverse” incentives for customers. 

A source close to Ms Coutinho confirmed she had received the report on green levies but stressed no official decisions had been taken on what to do about the situation. 

It is thought that a decision is unlikely this side of May’s local elections given sensitivities around high energy bills. 

The Telegraph 

 Energy giants profit £420billion as millions of Brits suffer with cost of bills 

Energy giants are “taking us for fools” after raking in a £420billion profit bonanza, campaigners claim. 

Analysis has revealed the bumper sums made by some of the biggest energy firms operating in the UK. They range from oil and gas producers such as BP and Shell through to lesser-known firms paid to get energy around the country. 

The 20 companies included have made a combined £420billion profits since 2020, according to research by the End Fuel Poverty Coalition campaign and shared with the Daily Mirror. The period includes Russia’s invasion of Ukraine, which triggered a surge in wholesale energy prices which fattened profits for a number of big energy firms but left households reeling from sky-high bills. 

Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “The energy firms are taking us for April fools. These numbers may look like fantastic amounts to shareholders, but the reality is that these profits have caused pain and suffering among people living in fuel poverty for the last few years.” 

While energy profits have surged, households have battled to make ends meet. An estimated 3.26million homes in England are classed as being fuel poor given their state and that those in them exist below the poverty line. 

Meanwhile, energy debts have hit a record £2.9billion as households struggle to pay their essential bills. Analysis from Citizens Advice in January predicted more than two million people across Britain would disconnect their gas and electricity over the winter because they can’t afford to top up their prepayment meter. 

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The plight of those struggling contrasts sharply with the profits made by big energy firms. According to the End Fuel Poverty Coalition, Norwegian state-owned energy giant Equinor – which provides more than a quarter of the UK’s gas – has made £117.4billion since 2020. The figure covers its worldwide operations. 

Rival Shell has made £84.5billion around the world during its past four financial years, BP £38.4billion globally, and British Gas owner Centrica £7.4billion. 

The latest findings were punished to coincide with a sharp fall in regulator Ofgem’s energy price cap from April 1. The cap will tumble by an average £238 a year, from £1,928 to £1,690, based on paying by direct debit but will differ depending on usage. 

The research also looked at money made by firms responsible for electricity and gas transmission and distribution, the so-called “highways and main roads” of the energy system. Some of that comes from “network costs” that are included in the standing charge on energy bills. While the unit rate that households pay will drop from today, the standing charge element will rise. 

Fiona Waters, spokesperson for the Warm This Winter campaign, said: “The public are beyond frustrated at being a cash machine for companies who use our broken energy system to cream as much profits as they can out of them, while hard working people are up to their eyeballs in energy debt.” 

Shell declined to comment. 

Centrica said the same but did point out that, since the start of the energy crisis, British Gas had committed £140million in voluntary support to customers in addition to £400million of mandatory support. 

Equinor and BP were contacted. 

Energy UK, which represents generation and supply firms, said: “While some suppliers have returned to profit recently before that – as Ofgem has pointed out – the GB retail sector had collectively lost £4billion over four years.” 

Ofgem, referring to standing charges, said “There are no easy answers as the costs covered by it have to be paid. Moving them onto the unit rate may help some households but it would leave others significantly worse off.” 

The Mirror 

 UK at risk of summer water shortages and hosepipe bans, scientists warn  

The UK could face water shortages and hosepipe bans if this summer is hot and dry, despite having experienced the wettest 18 months since records began. 

Leading scientists have said that because the UK is not storing its water properly, the country is vulnerable to the “all or nothing” rain patterns being experienced more frequently due to climate breakdown. 

There have been no new major reservoirs built in the past three decades, rivers have been engineered to move water quickly so it runs into towns and cities – causing floods – and the sea, and many wetlands have been drained and farmed or built on. This means the water that pelts the UK in winter is not being stored properly, causing floods followed by water shortages in summer. 

The Environment Agency released a report last week that predicts a growing shortfall of water in coming years, leading to a deficit of almost 5bn litres of water a day by 2050. This is more than a third of the 14bn litres of water currently put into public water supply. The shortfall may be revised upwards; without action, draft government plans indicate that by 2050 the nation’s public water supply will face a shortfall of more than 4,800 Ml/day (million litres per day), which has risen from 4,000 Ml/d in the 2021 draft, due to revised forecasts of demand and additional reductions in abstraction to improve the environment. 

Shortages in practice mean public supply is prioritised, and agriculture and other businesses being banned from abstraction, forcing them to cease operations for a time. Also likely to happen is a ban on filling swimming pools and ponds, and cleaning public buildings. Hosepipe bans are already in place during hot and dry periods, with people prohibited from using them to wash their cars and water their gardens. 

Jamie Hannaford, a hydrologist at the UK Centre for Ecology & Hydrology (UKCEH), said: “It was an extremely wet winter, with England seeing the wettest October to February on record (since 1890). Rainfall was at least twice the February average across central and southern England. 

“If there is below-average rainfall sustained over the coming months, especially if temperatures are also high (leading to high evaporation rates and water demand), then this could put pressure on water supplies in areas where there is limited groundwater storage, which rely on rivers and reservoirs for water supply. In these areas (notably, upland northern and western areas) reservoir stocks and river flows can be depleted rapidly during warm, dry spells in spring, even after wet winters – as occurred in the 2010 drought that followed a wet winter and flooding in north-west England.” 

Prof Hannah Cloke, who specialises in water at the University of Reading, said: “It is always good for water supply levels to be high as we go into the spring and summer, after a record-breaking wet past 18 months, but it is still possible for regions of the UK to dwindle if we experienced another lengthy dry spell. Unfortunately, these ‘all or nothing’ periods of rainfall we are experiencing in the UK are likely to increase as heat continues to build up in the atmosphere and oceans. We need to realise that our water infrastructure is creaking and required billions of pounds of investment.” 

Jo Parker, a chartered civil engineer who has worked in the utility industry for 30 years, said that even after record rainfall there could still be hosepipe bans in the event of a record hot summer. 

“The amount of untreated water storage in this country is far lower than we need as there have been no reservoirs built for the last 30 years,” she said. 

“Water demand has increased, particularly in the summer, as the population has grown and more people enjoy such things as water features, paddling pools and power washers. Coupled with summer temperatures soaring into the 40s due to climate change,” she added. “Whilst this has not generally lead to widespread problems, it has required some hosepipe bans (or to use its proper terminology, temporary use bans) and some localised shortages which are often due to bottle necks in the distribution network rather than an overall shortage of water. 

“Without knowing what the weather will be like this summer it is difficult to predict what will happen.” 

The Guardian  

Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House.