Public could receive hundreds of millions as water firms face sewage lawsuit | Water industry

The public could receive hundreds of millions of pounds in compensation in the first class action against water companies which are alleged to have failed to reveal the true scale of raw sewage discharges, and abused their position as privatised monopolies.

A collective case against six water companies alleges they have failed to properly report sewage spills and pollution of rivers and seas to the Environment Agency and Ofwat, the regulator for England and Wales. The first of six parallel claims is against Severn Trent Water on behalf of its 8 million customers. Claims against Thames Water, United Utilities, Anglian Water, Yorkshire Water and Northumbrian Water are being brought in the coming months.

The legal claims allege the water companies have breached competition law by failing to report discharges which would have affected the price they can charge to customers.

The number of pollution incidents a company reports, and any breaches to permits attached to water treatment plants to control raw sewage releases, are actors in determining the price water companies can charge for their services. So, the claims allege, underreporting of pollution means water companies could have been overcharging customers.

Prof Carolyn Roberts, an environmental and water consultant represented by the law firm Leigh Day, is bringing the claims at the competition tribunal on behalf of more than 20 million householders who are customers of the water firms. The claims say customers have been overcharged because the companies abused their monopoly positions. They failed to fully report the scale of raw sewage discharges into rivers and seas, and in doing so avoided penalties which would have had an impact on the price they could charge customers, the claim alleges. As a result, Roberts says, customers have been overcharged to the tune of hundreds of millions of pounds.

Roberts, emeritus professor of environment at Gresham College, said she had been researching rivers since the 1970s. “The last two decades have been catastrophic for rivers and I want something done about it,” she said. “The population of the UK has a right to expect that our rivers, lakes and seas will generally be clean, except under exceptional circumstances.

“It appears that because of the serial and serious underreporting at the heart of these claims, water companies have been avoiding being penalised by Ofwat. I believe this has resulted in consumers being unfairly overcharged for sewage services.”

Roberts said millions of customers had been paying their water bills on the basis that water companies were meeting their targets, but instead every year water companies let raw or partly treated sewage into the environment in breach of the rules.

She argues in her legal claim that the water companies have been breaking competition law by misleading the Environment Agency and Ofwat as to the number of pollution incidents they made into rivers, lakes, coastal areas and other waterways, causing damage to the environment. The number of pollution incidents a company reports to the regulators is an important factor in determining the price water companies can ultimately charge for their services.

If she is successful, anyone who has paid a water bill to one or more of these water companies from April 2020 may be entitled to compensation. The value of the claim against Severn Trent Water is estimated at more than £330m and if successful, the six claims could lead to compensation payments of more than £800m.

Compensation is being sought through competition opt-out collective proceedings, which allow legal claims to be brought by a single class representative on behalf of a group, or groups, of affected individuals in the Competition Appeal Tribunal. Customers do not have to sign up to the case. They will receive compensation if the claims are successful.

Zoë Mernick-Levene, a partner at Leigh Day, said the claims were hugely significant. “Not only is compensation being sought for millions of customers who have, and continue to, pay higher water bills, but we hope that it will also send a message to water companies that they cannot unlawfully pollute waterways and mislead their regulators without consequence.

“Customers put their trust in water companies, believing that they are correctly reporting these spillages and appropriately treating the sewage so it can safely be returned to the environment. Instead, our client believes they are misleading their regulators and customers are overpaying while England’s waterways are suffering as a result.”

The competition claims come as six water companies are under investigation by Ofwat and the Environment Agency after what regulators said were “shocking” failures in the way the majority of water companies run their waste treatment works. The investigation is focused on water companies not disclosing the scale of raw sewage discharges and non-compliance with its permits.

As part of the investigation, the Environment Agency is sending specialist investigators into water companies across England to secure evidence in what amount to its biggest criminal investigation into illegal sewage dumping since the industry was privatised three decades ago.

Severn Trent said it strongly refuted the claim. “This is a highly speculative claim with no merit which we strongly refute. Should pollutions ever occur, they are always reported to the Environment Agency. Any claim to the contrary is wholly and completely wrong.

“Our regulators, the Environment Agency and Ofwat, set strict targets and performance measures that deliver for our customers and the environment. Severn Trent is recognised as a sector leader by both regulators across operational and environmental measures. We consistently deliver for our customers, and recently received the highest 4* status for environmental performance from the Environment Agency for the fourth year running.”

Yorkshire Water said: “We are aware of an alleged claim being pursued by Leigh Day solicitors. Given the nature of the proposed proceedings, it would be inappropriate for us to comment any further.”

A Thames Water spokesperson said: “TWUL is aware of a claim threatened by Prof Carolyn Roberts. TWUL has engaged cooperatively with Prof Roberts to explain that the threatened claim is without merit. No claim has yet been issued against Thames.”

A spokesperson for Water UK, the industry body, said: “This highly speculative claim is entirely without merit. The regulator has confirmed that over 99% of sewage works comply with their legal requirements. If companies fail to deliver on their commitments, then customer bills are already adjusted accordingly.”

Northumbria Water did not respond to requests for comment, while United Utilities and Anglian Water pointed towards the Water UK comment.