respond to the water commission

Explanation:
This section focuses on who owns and controls water companies—and whether different ownership models lead to better outcomes for people, rivers, and the environment. Since privatisation in 1989, most water companies in England have been privately owned, many by private equity firms, pension funds, or international investors. Dŵr Cymru/Welsh Water operates under a not-for-profit model. Across Europe, water services are managed through a variety of systems, but public authorities are generally responsible for approving tariffs, determining service quality and establishing and enforcing environmental and health standards.

The Commission is asking:

• Have company mergers improved or worsened performance?
• Does being listed on the stock exchange affect company accountability or priorities?
• How do complex financial structures (like Whole Business Securitisation) impact behaviour?
• Do investor types matter—are private equity firms worse for the environment than pension funds?
• Has the Welsh not-for-profit model delivered better outcomes?

River Action’s position:
We believe the current private ownership model has led to widespread underinvestment, financial mismanagement, and failure to protect the environment.

• Water companies have racked up £74 billion in debt since privatisation, while paying out £85 billion in dividends.
• Pollution has become profitable, with companies focusing on shareholder returns instead of fixing leaks or improving treatment plants.
• Private equity ownership often prioritises short-term gains, not long-term river health or infrastructure.
• We believe water should be managed for public good, not private profit.
• Models to consider instead are public ownership, municipalities ownership, regional water authorities, not-for-profits (learning from the poor performance of the Welsh model), or Community Interest Companies (with the correct mission in place). 

Alternative Ownership Models We Support:

Model 1: Public Ownership  

River Action supports full public ownership of water. While the current government has ruled this out, we recommend the Commission recognise the strong public interest in the idea and consider its strengths and weaknesses by looking at publicly owned models across Europe.  

Direct public management involves the public authority being fully responsible for providing and managing the service, a model that was once dominant across Europe. Countries such as Austria, Bulgaria, Croatia, Cyprus and Finland are examples of this. 

In delegated public management, a public authority appoints a separate entity, still publicly owned in most cases, to carry out management tasks. However this sometimes allows for limited private ownership. Belgium, France, Greece and Ireland are the best known examples. 

In delegated private management, a private company is contracted to manage services for a defined period, typically through lease or concession agreements, while ownership of the infrastructure remains with the public sector. This model is common in countries where municipalities subcontract their responsibilities to private firms.

Publicly owned utilities in countries such as Switzerland, Austria and France benefit from democratic oversight, value for customers, lower borrowing costs, and access to government-backed finance at interest rates significantly below those faced by private companies.

These models are not without challenges – underfunding issues, such as in Northern Ireland. The majority of European public ownership models have found success though with the essential combination of effective municipal oversight and the support of governments to back plans to modernise and invest.

If you support renationalisation, feel free to say so in your response. The models below are ones River Action also recommends the commission considers in addition to full nationalisation, and supports them as alternative reforms that may be more achievable in the short term.

Model 2: Municipalities 

Across Europe and the USA, municipalities are responsible for the democratic planning and delivery of water services, finances, governance and operations in each region, and aligned towards achieving a national strategy for sewage treatment, water quality and supply. Municipilisation saves money: Paris saved €35million and reduced the customer’s tariff by 8% in their first year of remuniciplisation). It improves infrastructure: Régie des Eaux de Grenoble has increased investments in maintenance and infrastructure renewal threefold as compared to the previous private operator improves infrastructure investment). It prevents pollution:  Paris’ Seine bacteriological pollution was reduced by 75% by the end of the Olympic Games. 

Over 180 cities and communities in 35 countries, including Buenos Aires, Johannesburg, Paris, Accra, Berlin, La Paz, Maputo and Kuala Lumpur, all turned from private to municipal water ownership between 2000 and 2014.

Model 3: Regional Water Authorities 

This would re-establish publicly owned Regional Water Authorities, like those that existed before privatisation. 

Drawing on successful European models in Austria, Sweden, and Denmark, where sewage and water systems are publicly owned and locally managed, this approach would ensure that local communities have meaningful input and oversight. In practice, these regional authorities would lead the strategic planning of water services, with private, or hybridised, operators bidding to deliver services under short-term, performance-based licenses. Accountable to government and the public, they would manage water resources for long-term environmental and public benefit, with joined-up planning and pollution control across catchments, while maintaining the potential to draw on private sector expertise and investment within frameworks that prioritise customers, the public and environment.

Model 4: Not-for-profit 

A not-for-profit organisation is a business that aims to do something other than to make profit for the owners, such as providing a public service or helping people. It needs to make enough money to cover its costs, but any surplus is reinvested into the business or used in other ways to further the objectives of the organisation and its beneficiaries.

Some not-for-profit models could allow a water company to remain in the private sector but to realign a water company’s principles and objectives to be realigned in the interest of people and the planet. 

Dŵr Cymru/Welsh Water has this model and whilst it has no shareholders, it has over £5 billion in bondholders. In 2024, Welsh customers were paying 25% of their bills to these bondholders. 

This trading of bonds on foreign exchanges may reduce transparency, and key decision-makers within the organisation may have more concentrated authority than directors of PLCs, with just two operational directors in the organisation who have more decision making power than the boards of a PLC. Therefore, as a not-for-profit private limited company Dŵr Cymru/Welsh Water are less transparent than many other models. 

Dŵr Cymru/Welsh Water was responsible for 105,943 sewage spills in 2023, and Ofwat currently rates the company as “lagging behind” across key metrics. The Drinking Water Inspectorate rated Wales as the worst performer on water quality in 2024. Performance is “poorer than target” on 7 of 12 regulatory indicators, including pollution, drinking water quality, and leakage. In 2023, Dŵr Cymru/Welsh Water was fined £40 million for providing misleading data and failing on governance over a five-year period. 

This points to the need to consider other not-for-profit examples than Dŵr Cymru/Welsh Water when considering this model, and that all water companies, however they are owned, still need tough holistic regulation to ensure they are compliant with the law. This can only be achieved with well-funded, empowered and independent regulators which are accountable to the public and parliament. This should be in combination with municipal oversight of the planning, funding and operations of a water company at local and national levels as we see across Europe.

Model 5: Public Benefit Company/Community Interest Company

Community Interest Companies (CICs) are limited companies which operate to provide a benefit to the community they serve. 

They are still private companies, allowing private investment to bring in capital for infrastructure investment. Whilst they would still expect to pay shareholder dividends this can only happen when community interest is met (e.g. environment, climate, public health, and bill pricing), hugely incentivised these targets for the board and executives. Dividends are also capped to a maximum of 35% of profits (in contrast, in 2023-2024 Severn Trent paid out dividends at 215% of profits and Yorkshire water paid out dividends worth 125% of profits according to a SAS report to be published April 2025) meaning better value for customers’ money than publicly-traded companies. 

Assets are locked so if the CIC dissolves or fails, it cannot be sold to for-profit businesses, only charities or CICs with a similar community-interest mission. 

You might want to recommend to the Commission that they require all water companies to convert to a CIC model (or a US Public Benefit Company model).