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Thames Water has warned that its aging assets pose a “risk to public safety, water supplies and the environment” in a report that reveals the extent of the problems facing Britain’s biggest water utility, which is at risk of financial collapse.
The regional monopoly, which provides essential water and sewerage services to London and the surrounding area, has warned that it has assets worth around £19bn that are in a “poor” or “failing condition” or “no longer able to perform their function reliably”. .
The problems range from crumbling sewer and water pipes to outdated monitoring equipment and a lack of reservoirs, the company’s report said.
Dangers from years of under-investment include the risk of “flash flooding” for 37,545 basement properties in London because they are “close to mains water pipes which are more likely to burst”.
There are also risks of Cryptosporidium oocysts – a parasite in drinking water that can cause diarrhea – as four of London’s major water treatment plants require upgrades.
Since 2018, 43 cases of cryptosporidium have been found in water, the report said, and the drinking water inspectorate expressed concern.
The warning is part of a business plan for the next five-year regulatory cycle submitted by Thames Water to watchdog Ofwat as the company tries to stave off financial collapse and temporary nationalisation.
Thames Water’s proposals include a 59 per cent increase in household bills. Ofwat is due to make a draft decision on the company’s business plan on July 11, less than a week after the UK goes to the polls in a general election.
Politicians of all stripes have spoken out against the water companies, which have attracted public outrage after pollution and spills. However, Thames Water, which is struggling under the weight of £18bn of debt, has come under the most scrutiny. Labour, widely tipped to win the election, has said it is not in favor of nationalizing Thames Water but wants a stricter regulatory regime.
Plans by Thames Water, which serves around 16 million homes, to increase household bills would see costs rise from around £471 a year to £749 in 2029-30, assuming inflation of 2 per cent.
The utility hopes that this, and a new “enforcement regime” that includes caps on regulatory fines, would allow it to raise debt and equity later this year to operate and deliver improvements.
It said it had enough cash to see it through to May 2025. Its biggest investor, Canadian pension fund Omers, wrote down its stake to zero, and shareholders said the current regulatory regime made Thames Water “uninvestable”.
With most of the company’s infrastructure installed before it was privatized 34 years ago, the need for costly repairs to poorly maintained assets is eating up an increasing portion of its budget and draining cash for improvements, the report said.
Thames Water has said it needs to spend £19bn over the five years to 2030, which would help it double its capital expenditure allowance from £6bn in the current five-year period to £12bn, of which £1.9bn will go towards upgrading existing assets.
Thames Water’s report says the company wants to “break the cycle of asset sweating” but claims Ofwat has historically underestimated “operational risks” and the extent of capital maintenance required.
Ofwa declined to comment on the report.
The report says Thames Water’s current annual replacement rate for sewers is 0.2 per cent, meaning they will take 500 years to replace, while water mains have a rate of 0.6 per cent and will take 167 years.
Thames Water said in a statement that it had already started upgrading its largest water treatment plant in London and that “since 2010, more than 99.95 per cent of tests taken from customers’ taps have met the standard required by UK legislation”.
Riser explosions – which pump wastewater through sewer lines to sewage treatment plants – have increased by 70 percent over the past seven years, in part because infrastructure installed in the latter half of the 20th century has now “reached the end of its estimated service life.” life”, the report says.
The last major improvement program was carried out between 2006 and 2008 and investment in rehabilitation and replacements has not kept pace since then, the report said.