Everything water companies do – from their performance, to shareholder dividends to executive pay – is being scrutinised more than at any time in the last 30 years, according to Ofwat chief executive Cathryn Ross.
Speaking at Moody’s UK Water Sector Conference, Ms Ross said the sector’s legitimacy has been called into question not “because of what customers are getting” but rather “how they are getting it”. Citing achievements since privatisation, Ms Ross said there “really is a good story to tell”. More than £140bn of investment, she pointed out, has gone into the sector over the past thirty years with costs “kept in check” and bills “a third lower than they otherwise would have been”. She also highlighted that customers are now “paying less than a penny per litre of water”, with supply interruptions more uncommon and beaches cleaner.
Describing the current scrutiny as a “wake up call”, Ms Ross said companies must do more to address lingering public concerns, including the perception that boards are “stuffed full of investors”, that companies are “making every call in the interests of investors rather than customers” and also the “lack of transparency” around finances. Whilst acknowledging the progress already made by companies in areas such as appointing independent directors to their boards, Ms Ross nevertheless cautioned that “there is more still to do”.
“If we are successfully going to meet the legitimacy challenge that is being posed to the sector, we need to be able to demonstrate that, despite people’s suspicions, water companies are indeed being run in the public interest,” she said.
Ofwat, she said, stepped into this debate four years ago, with calls for improvements in board leadership, transparency and governance in the sector. But, she said, there was more for companies and investors to do “to demonstrate that companies are operating in the best long term interests of customers and society”, rather than “the long term interests of their shareholders.”
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