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Water regulator Ofwat hired several consultancies to advise water and wastewater companies at the same time, raising concerns about conflicts of interest.
Research by government contracting expert Tassel has revealed that five advisory groups, including PwC and Deloitte, have awarded contracts to regulators in England and Wales over the past six years, while also providing regulatory and operational advice to water companies. was.
Ofwat is negotiating with water companies over the next five years to increase the rates it can charge customers. The government is also waiting to see whether it will recommend a complete replacement of the regulator after criticism that it has been too lenient in dealing with the companies it oversees.
Ofwat last year hired PA Consulting to assist with the 2024 price review on an “if necessary” basis in a contract worth £1.2m shared with Grant Thornton, according to published tender documents. . At the same time, the PA is providing consulting services to Thames Water, which is pressing Ofwat for more lenient fines and higher customer bills.
Tender documents compiled by Tassel show that another consultancy firm, Balinga, was hired by Ofwat this year to provide business support and management consultancy in a contract worth £112,560, while at the same time regulating the River Thames. It was shown that the above advice was also provided.
Ofwat also paid more than £1 million to PwC in 2020 and 2021 to support regulatory settlements over the next five years. At the same time, PwC advised Southern Water on price negotiations with Ofwat.
In 2018 and 2019, Ofwat engaged Baringa, KPMG, Deloitte, PA Consulting and PwC to assist with final price negotiations. At the same time, PA Consulting and Deloitte advised Anglian Water on “business and management consulting services” including reporting and governance.
Ofwat, which regulates 16 water companies in England and Wales, said it paid a total of £25.9m between 2016 and 2024 to consultancies including EY, KPMG, Deloitte, PA Consulting, Balinga, Grant Thornton and PwC. Mr Tassel’s figures were confirmed by the financial newspaper. The Times shows. Some of the payments were for audit services rather than consulting advice.
Liberal Democrat environment spokesman Tim Farron said the disclosures proved “Ofwat is a dysfunctional regulator and should be replaced immediately”.
He added: “Ofwat employs the very same people who work for water companies, so how can we hold these polluting companies to proper account?” added.
Mr Ofwat said: “A rigorous dispute procedure is in place which requires consideration of any assignment that could be seen to pose an actual or potential conflict of interest before work begins.” Ta.
He emphasized that these should not create bias or impediments to regulatory decision-making.
Regarding the Price Review 2024 contract, Ofwat said it required “flexible access to high-quality resources across a wide range of technical skill sets”.
The regulator has cracked down on water company failures amid huge public outrage, while also ensuring that there is enough funding to deliver the billions of pounds of new infrastructure needed and that prices are sustainable for customers. We are faced with a delicate balance between maintaining this at a possible level.
Several companies are also struggling with debt burdens totaling £73bn, and regulators need to work to prevent water companies from going bust.
Ofwat has been accused by environmentalists of running a light-touch system that failed to clamp down on dividends and senior salaries at the expense of investment in infrastructure such as sewage treatment plants and pipe networks. .
Ministers acknowledged that “the entire water sector has failed” and ordered the water industry regulator to consider abolishing Ofwat completely.
PwC said it was “in compliance with all regulatory, professional, ethical and independence standards”. We have ongoing procedures in place with Ofwat to ensure transparency with our clients and address any potential or perceived conflicts of interest. ”
Thames Water said it was the consultancy’s responsibility to prevent conflicts of interest. “We expect Thames Water’s information to be kept confidential at all times,” it added.
PA Consulting said it “applies rigorous procedures to ensure client confidentiality and effectively addresses potential conflicts of interest.”
“We have taken a series of strong measures to ensure compliance with the highest professional standards, including maintaining strictly segregated project teams,” Balinga said.
Southern Water, Severn Trent, Anglian Water, Yorkshire Water, KPMG, Deloitte, Grant Thornton and EY declined to comment.
