--- title: "Thames Water and its regulators" language: en canonical: https://dossiertwist.com/dossiers/thames-water-utilities-limited/regulation/ as_of: 2026-10-17 keywords: ["Thames Water Utilities Limited","Thames Water","Kemble Water Holdings","Thames Water Utilities Holdings","Kemble Water Finance","Thames Water Utilities Finance","whole business securitisation","Ofwat","Environment Agency","restructuring plan","Class A creditors","London & Valley Water","special administration","Ultimate Controllers","OMERS","Universities Superannuation Scheme","sewage pollution","Condition P30","super senior funding","PR24"] --- # Thames Water and its regulators **Question.** How have Ofwat and the other regulators dealt with Thames Water Utilities Limited? **Answer.** Thames Water Utilities Limited (TWUL) is the appointed water and sewerage undertaker regulated by Ofwat, the Drinking Water Inspectorate and the Environment Agency. It gave a leakage undertaking in 2006 after missing its 2005–06 target, and Ofwat found breaches in 2018 after it missed its 2016–17 commitment. Ofwat accepted undertakings after TWUL lost its investment-grade ratings in 2024, placed it in a Turnaround Oversight Regime, allowed £20.5 billion of spending for 2025–30 against the £24.5 billion it sought, rated it 'lagging' and kept it in its lowest financial resilience category. ## The licence and the regulators - Analysis: Thames Water Utilities Limited (TWUL) is the water and sewerage undertaker appointed under section 6 of the Water Industry Act 1991 under a licence of appointment issued by the Environment Secretary. The Drinking Water Inspectorate identifies it by its registered number 02366661, and its core activities are regulated by the Water Services Regulation Authority (Ofwat), the Drinking Water Inspectorate and the Environment Agency. [src-014] [src-048] ## Leakage failures, 2005–06 and 2016–17 - Analysis: In its review of Kemble's purchase of Thames Water, Ofwat said that the company's price limits for 2005–10 would stay as set at the 2004 review and that the outputs of the legally binding undertaking Thames Water had given on 3 July 2006, for missing its leakage target in 2005–06, would remain in place under the new owners. [src-012] - Analysis: Thames Water's 2016–17 annual report, published on 14 June 2017, showed that it had again missed its leakage commitment, incurring the maximum automatic penalty of £8.55 million for that target, borne by the company rather than customers, and Ofwat opened investigation OFW-0017071. Ofwat found breaches of section 37 of the Water Industry Act 1991, the duty to maintain an efficient and economical water supply system, and of Condition F paragraph 6A.1 of the instrument of appointment on adequate resources and systems of planning and control, largely because of how the company designed and ran its leakage-reduction contracts; its board had insufficient oversight of leakage, and the company underestimated its underperformance when assuring Ofwat that it was meeting its statutory obligations. On 7 June 2018 Thames Water agreed a package worth £120 million — £65 million paid back to customers on top of £55 million of automatic penalties for missed leakage and security-of-supply commitments, which it brought forward, about £15 per customer over two years. In light of it Ofwat imposed a penalty of £1 on 8 August 2018 and published Thames Water's undertaking under section 19 of the Act, committing it to restore leakage to the promised 606 megalitres a day (Ml/d) by 2019–20, plan a further 15% reduction by 2025, publish monthly audited progress reports, pay no executive or senior management bonus tied to 2018–19 and 2019–20 leakage performance unless it met its commitments, and review the governance of the boards of TWUL and Kemble Water Holdings. [src-079] [src-080] ## The 2024 ratings breach and the Turnaround Oversight Regime - Analysis: Condition P26 of TWUL's licence requires it, or an associated company issuing debt for it, to hold at all times two investment-grade issuer credit ratings from different agencies; the downgrades by Moody's on 24 July 2024 and S&P on 31 July 2024 put it in breach. In August 2024 Ofwat accepted undertakings under section 19(1) of the Water Industry Act instead of an enforcement order: TWUL committed to develop a new business plan, to use all reasonable endeavours to raise substantial equity on a timetable and milestones agreed with Ofwat, to appoint two further experienced independent non-executive directors and to appoint an independent monitor of its compliance with the undertakings and of its progress towards restoring investment-grade ratings. TWUL's 2024/25 annual report presents these as commitments it made with Ofwat after the downgrades, aimed at restoring the two ratings. L.E.K. Consulting was appointed monitor in October 2024, and Aidan de Brunner and Neil Robson joined the board as the two independent directors. At the restructuring plan sanction hearing in February 2025 it was common ground that TWUL was not meeting Ofwat's expectations on costs or financing and no longer held investment-grade ratings, in breach of its licence. [src-048] [src-028] - Analysis: With its draft determination of 11 July 2024, Ofwat placed Thames Water in a Turnaround Oversight Regime because of concerns about its performance. The regime required a delivery action plan to expand delivery capacity, with regular progress reports reviewed by an independent third-party assurance provider, a full re-evaluation of the company's transformation plans and a financial resilience plan, and Ofwat said it was considering an independent monitor with full access to company information. To leave the regime the company would have to show sustained improvement in operational performance and in its capability to deliver the investment programme, and better medium-term financial resilience, which Ofwat said could mean a limit on its debt, its separation into two or more water companies, or a public listing to raise equity. [src-048] [src-084] ## The 2025–30 price control and the CMA reference - Analysis: For the 2025–30 price control (PR24), Ofwat's draft determination of 11 July 2024 allowed TWUL £16.9 billion of total expenditure against the £22.2 billion in its April 2024 business plan, with a wholesale cost of capital of 3.66% on assumed gearing of 55%. TWUL asked for £24.5 billion in its response of 29 August 2024; the final determination of 19 December 2024 allowed £20.5 billion. TWUL judged the final determination neither financeable nor investible and announced on 14 February 2025 a unanimous board decision to ask Ofwat to refer it to the Competition and Markets Authority (CMA); it was one of six companies to do so before the 18 February 2025 deadline, with Anglian, Northumbrian, South East, Southern and Wessex Water. [src-054] [src-048] [src-047] [src-086] - Analysis: In witness evidence for the restructuring plan, TWUL's chief financial officer Alastair Cochran said the draft determination would have generated potential penalties of up to £2 billion, and Andrew Fraiser, general counsel of the plan company, TWUL's parent Thames Water Utilities Holdings Limited, called it neither financeable nor investible, saying it funded only half of TWUL's proposed wastewater enhancement spending and set unachievable wastewater targets; the Court of Appeal later recorded the company's evidence that meeting its commitments within the final determination would be "incredibly challenging", on top of significant unfunded fines and penalties. These are the company witnesses' assessments, not findings of the court or of Ofwat. [src-048] [src-054] - Analysis: The reference has not been made. On 18 March 2025 TWUL agreed with Ofwat to defer it for up to 18 weeks to explore a market-led recapitalisation; the deferral was extended on 18 July 2025 to 22 October 2025 and on 21 October 2025 without an end date, which Ofwat agreed given TWUL's continuing talks with its creditors. The CMA published provisional determinations for the other five companies on 9 October 2025, with final determinations due by 17 March 2026; if TWUL withdrew its agreement, its redetermination would follow a separate process. TWUL keeps its statement of case ready and says it cannot do everything required for environmental compliance in 2025–30, including the 2025–30 Water Industry National Environment Programme (WINEP8). [src-047] [src-086] ## Performance, financial resilience and the bonus ban - Analysis: TWUL has 55 regulatory performance commitments measured by Ofwat. It incurred a net performance penalty of £88 million (2017/18 prices) for 2024/25, including end-of-period commitments and customer and developer experience measures, and £344 million over 2020–25. In their annual assessments for 2024–25, published in October 2025, Ofwat rated it 'lagging' and the Environment Agency gave it one star in its Environmental Performance Assessment; TWUL attributes the one star mainly to non-delivery of its 2020–25 environmental programme (WINEP7) and the number of serious pollution incidents, and says a more rounded analysis shows it largely mid-table. [src-028] [src-047] - Analysis: Ofwat's Monitoring Financial Resilience report for 2024–25, published on 5 November 2025, kept Thames in its lowest category, 'Action Required' with active monitoring, in both 2024 and 2025, alongside South East and Southern; the three were in cash lock-up and could not pay dividends without Ofwat's consent, and Ofwat noted the £18.2 million fine of May 2025 for failing to link dividends to performance. Thames Water was also one of six companies that triggered Ofwat's new rule barring performance-related pay for directors for 2024/25, mostly because of category 1 pollution incidents; the rule, a power given by the Water (Special Measures) Act 2025, was introduced in June 2025, and Ofwat reported on 5 November 2025 that all six had complied by paying their directors no annual bonus or other relevant performance-related pay. [src-085] ## Drinking Water Inspectorate notices - Analysis: The Drinking Water Inspectorate made final enforcement orders against TWUL in September 2024 on physical security and emergency planning, setting out the steps the company had to take, without a penalty; TWUL's 2024/25 annual report also records steps agreed with the Inspectorate after a loss of supply in Guildford, again without a penalty. On 15 July 2025 the Inspectorate, for the Environment Secretary, served TWUL with notice TMS-2025-00002 under regulation 28(4) of the Water Supply (Water Quality) Regulations 2016, after the company's own report of 21 February 2025 that there was or had been a significant risk of supplying water from the North Cotswolds Supply System that could endanger health or be unwholesome. The notice concerns the risk of lead contamination and sets measures and reporting deadlines into 2029, with a board-signed completion report due by 30 April 2030; failure to comply may lead to enforcement under section 18 of the Water Industry Act 1991. [src-028] [src-014] ## Sources - [src-014] Thames Water Utilities Limited – North Cotswolds Supply System Lead: notice under regulation 28(4) (TMS-2025-00002), Drinking Water Inspectorate, 2025-07-15 - [src-048] Re Thames Water Utilities Holdings Ltd [2025] EWHC 338 (Ch): approved sanction judgment, High Court of Justice (Business and Property Courts), 2025-02-18 - [src-012] The completed acquisition of Thames Water Holdings Plc by Kemble Water Limited: a position paper, Ofwat (Water Services Regulation Authority), 2007-05 - [src-079] PN 22/18: Thames Water’s failure to tackle leakage results in £65m package for customers, Ofwat (Water Services Regulation Authority), 2018-06-07 - [src-080] Investigation into Thames Water’s failure to meet its leakage performance commitments (OFW-0017071), Ofwat (Water Services Regulation Authority), 2018-08-08 - [src-028] Company statement source · src-028 - [src-084] Information note on Thames Water's draft determination, Ofwat (Water Services Regulation Authority), 2024-07 - [src-054] Kington S.à r.l. and others v Thames Water Utilities Holdings Ltd and others [2025] EWCA Civ 475, Court of Appeal (Civil Division), 2025-04-15 - [src-047] Company statement source · src-047 - [src-086] Competition and Markets Authority references (2024 price review), Ofwat (Water Services Regulation Authority) - [src-085] New bonus rule blocks £4m in first year of operation, Ofwat (Water Services Regulation Authority), 2025-11-05