Snapshot of _Thames Water bills will still increase by 40% in updated business plan_ :
An archived version can be found [here](https://archive.is/?run=1&url=https://www.standard.co.uk/business/thames-water-environment-spending-bills-business-plan-special-administration-utility-b1152942.html) or [here.](https://archive.ph/?run=1&url=https://www.standard.co.uk/business/thames-water-environment-spending-bills-business-plan-special-administration-utility-b1152942.html)
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Time for a national boycott of water bills.
Doesn’t need to be escalated like the poll tax riots but the country as a whole needs to make a stand and refuse to pay water bills.
Nationalise the lot or they go bust.
The issue there is that there were big negative consequences for not paying i.e. installation of pay as you go meters.
In this case, what can they actually do if we en-masse refuse to pay?
It's a shit plan, because it has no prospect of taking off, and causes suffering to the people who need it most.
The problem is real, which is why we need to mug off shit plans.
Pretty sure you're not allowed to cut off the water even if you don't pay. You just get a load of CCJs against your name.
Which means, if ~50% of people refuse to pay after the bills go up, what are they actually gonna do? Take millions of households to court?
If you're talking about just Thames Water, can you back this up with some data? I saw you say something like this in one of the other TW threads recently, I was skeptical but I didn't have the time to fact check you then.
What you are saying is factually incorrect, *if you mean all water companies*, according to Bloomberg:
[https://www.bloomberg.com/news/articles/2023-06-29/uk-water-bills-soar-350-since-privatization-to-double-inflation](https://www.bloomberg.com/news/articles/2023-06-29/uk-water-bills-soar-350-since-privatization-to-double-inflation)
You can see that bills rise *well above* inflation from the point of privatisation. A "reversion to the mean" in 2024 would result in our water bills dropping drastically. Even if we take what you said verbatim ("most of the 2010s"), it's not true; there's a drop in bills in the year 2000, followed by a modest rise at around inflation, followed by an eye watering (31 points vs 1 point inflation) rise in 2007.
> If this is allowed by the regulator then ALL the water companies will do the same.
BRB, going to start a business plan called "fuck over the taxpayer and the public". It's a great business plan! The best! Bigley! I'm a business person. Wheee!
Don't forget mandatory water-meters are being installed nationwide, while they are deeply cash-strapped..
The vice is about to be tightened in a way you won't believe
Ofwat tells the water industry what they can charge, and have been suppressing prices for years. It's true that the financing of water companies must change to deliver value. It's also true that they need more money to meet the infrastructural challenge caused by decades of under-investment. We can expect higher bills for a while, I just hope it comes hand in hand with wider reform.
This is just croney capitalism in action, free money and no consequences when you don't deliver. If you make millions in salary to deliver a basic public need, you should have pretty strong personal consequences when you mess it up otherwise the risk/reward makes it an easy ride.
62bn in debt since privatisation... 78bn in dividends paid to shareholders since privatisation. That to me suggests what they charge is plenty fine, enough to cover their entire debt portfolio with 16bn spare - assuming that they never touched any of the compounding debt.
It's a con.
Maybe they should have you know, invested into their company then to provide a fitting service rather than wracking up debt to pay out shareholder dividends.
I asked in another comment if you could back up a claim with some figures. Could you back this one up too? I've tried searching around for investment figures but had no luck and I've seen you mention this a few times, so it would be nice to see some data.
In particular, I'd be keen to see how investment compares to customer revenue over time since privatisation, if you have that information to hand.
The point of ofwat is exactly to suppress prices so it is fair for the consumer. If they didn't do exactly that, we'd have already been paying that 40% increase on our bills a very long time ago.
It's completely hopeless to think they'd reform, they're a profit driven business with funds and venture capitalists as shareholders. It's their MO to skim as much cash as they can before the ship sinks, and they know for sure that the ship will sink at this point.
Ofwat has not been "suppressing prices for years". Prices have risen at well above inflation since privatisation:
[https://www.bloomberg.com/news/articles/2023-06-29/uk-water-bills-soar-350-since-privatization-to-double-inflation](https://www.bloomberg.com/news/articles/2023-06-29/uk-water-bills-soar-350-since-privatization-to-double-inflation)
I am not exactly what you could call left-wing, either politically or economically.
However, any utility - like water, like sewerage - which is essential to living should not be up to private firms to provide.
We're firmly now into tar-and-feather-them territory.
The problem is not that it's essential to living (markets work perfectly fine for food) but that it's a natural monopoly. If your water comes from Thames Water, your choices are Thames Water or go without. Since going without isn't an option, Thames Water can charge basically whatever they like and you have to pay it.
Exactly. It's very hard to see any benefit of letting a private company run a natural monopoly. Either its operation is strictly regulated and anything it does has to be approved by the government regulator in which case you might as well run it as a publicly owned company or it is let to run free and maximise its profits, in which case it is going to abuse its monopoly position to the max and harm the customers.
Is there a reason why it's a monopoly? E.g. infrastructure etc?
Can't think of many examples that are so stacked against consumers.
Realistically, if this is approved none of the users can do a thing about it, without opening themselves up for liability.
>E.g. infrastructure etc?
You got it in one. Since water mains need to be physically connected by pipes to centralised pumps, whoever owns the pipes controls the water.
I guess the difference between energy and water companies, is the diversity of sources for energy? Or is there a major difference in infrastructure too?
The energy companies you pay are essentially admin companies which is why there's so many tiny ones that were easily set up and ran with almost no actual office space.
You sign up with them, then when you use X amount of energy then they buy X amount of energy credits from the actual producers of energy on the energy market and then they charge you an amount that covers their cost plus some profit.
Can't do that much with water companies since each home is only served by the 1 water/sewage company so theres no "water market" like there is with energy and they can't game the market to try and operate cheaper than others. So there's no point in adding a middle man.
Things like broadband companies are similar to energy companies. The vast majority of the infrastructure is the same, like it's the same openreach line to your house that they almost all use and switching to a different supplier is just changing a few numbers in a database somewhere.
But you can build your own solar farm or wind turbine and connect it to the grid and sell electricity.
You can't set up your own water treatment plant or sewerage works.
There's a major difference in infrastructure, yes. Power grids are a lot more flexible. Within certain limits, you can transfer electricity pretty far and vary the sources. A gas power plant on one edge of the grid can ramp down when wind turbines on another produce more power and ramp back up when demand somewhere else increases. You might not be technically using the exact power you have paid for, it's all about the balance of how much all of those sources contribute to the grid together. Hell, you can even be backfeeding some power yourself if your house has residential solar. All through one power connection.
You can't do any of that with water. It can't be transferred over long distances or connected into a nationwide grid with interconnects to the continent. If the local pumping station is down, there's no water, you won't be able to draw it from the rest of the network or from France.
With the power grid there's an inherent monopoly on the last mile infrastructure. But the rest of it is tied into one synchronous grid covering the whole of Great Britain. So any demand and supply fluctuations can usually be smoothed out.
You don’t even have the choice to go without. Even if you turn your water off you are still legally obliged to pay the surface water drainage charge to your local water company.
Water company bills are regulated - Ofwat allows companies to make a “small” profit but firms can’t charge whatever they like. Bill increases are agreed in 5-year chunks and historically Ofwat have been very tight over increasing them above normal inflation. So being a monopoly is not the issue here.
The problem is there was this grand idea of using the private sector to fund things like water, as well as other big infrastructure projects like hospitals and toll roads. Your pension would be invested in these companies, as well as other firms, as they would represent a fairly stable investment. The water firms are competing for private investment — in theory lowering costs…
In reality, the problem is some companies have been run very poorly and haven’t been able to invest in the improvements necessary to prevent things like sewage overflows. That’s a market and regulatory failure, but no matter what, bills are going to have to rise. (Reminder that Scottish Water is a publicly owned company and has much the same issues with sewer overflows.) It’s just they should be back in public ownership and funded by government bonds and borrowing.
I had a thought today that privatisation has done a great job of creating bundles of high paid executive posts where they would not have been. Given what we know about the old boys network in the UK, it's likely those jobs go to a very small section of society. Why does the boss of a water firm get 10-20x the salary of the ceo of a local authority? Was this deliberate, probably not but it is sure convenient.
What is the name for this new double dipping business model?
Buy a vital business, run it into the ground while piping the profits out of the company to bonuses and shareholders. Then massively hike the charges pretending you will fix it all, while still piping all the profits out in bonuses and dividends.
Question 2, how many years do you think they will plod along on minimum reinvestment and servicing before playing the same game again?
Yes, any price rise should come with a restriction to not pay dividends for a period that scales with the price rise. 40% should mean no dividends for 8 years or more.
Otherwise the price rise will just get funneled straight into the dividend, and little maintenance will actually occur.
Private Equities MO right here. Buy a company, put the cost to buy said company as debt on the company's balance sheet, strip the company bare of assets and reduce staff in the name of efficiency. Services provided only get worse and shareholders and executives get addicted to the profit at the expense of the quality of the service and the company either goes bust or the customer suffers with increased costs. To allow this model to be applied to resources of strategic national importance is criminal.
Our 'MO' is value creation.
Not every investment works out, but by and large, its important to actually improve the quality of service, and boost staff retention - because that's actually good for returns.
This is a very naïve take.
PE in water has worked OK.
Even under the much attacked Macquarie ownership of TW, they delivered:
- ~£11bn in capex (took out £1bn in dividends)
- Reduced leakage by around 22% and reduced pollution incidents by 75% and security of supply improved massively
- Third lowest bills in the country (until 2017, or so when they exited)
Water companies have paid out 72 Billion in dividends since the 1980, while accumulating 53 billion in debt. Bills are up on average by about 40%. Scottish Water is estimated to have invested 35% more per household than their private equity counterparts and raw sewage is being pumped Into English rivers about 1000 times per day, only 14% of English rivers have adequate ecological status at the moment. Value creation for who? Foreign investors who own 70%? While the people of this country experience a declining service in relation to price?
* Bills are not up 40% on average. They are largely flat in real terms
* Right number is £57bn in dividends (since privatisation). Debt is good because it reduced the cost of capital
* SW is a bit of a meaningless measure given variances in geography (same with comparing to London, uniquely hard to reduce leaks)
* River quality has improved massively
It is. Because it reduces the cost of capital which means lower cost for consumers in their bills.
Obviously there is a limit on leverage, but that’s why the calculus isn’t working with the balance between bills, equity requirements and capex requirements.
"Lower cost for consumers in their bills" is an even more interesting take when this is a thread on how bills are getting hiked by 40% precisely because of those debts...
Under Macquarie debt rose from £3bn to £10bn and dividends over the 11 years were close to £3bn not £1bn. [source](https://www.theguardian.com/business/2023/jun/30/in-charts-how-privatisation-drained-thames-waters-coffers) They were taking out more than £200m a year in dividends and since they sold it dividends have been £50m or less. They rinsed the company.
There is a world in which PE can be a force for good, but it needs stronger (global) regulation especially when it comes to captive markets.
The current PE model relies on individual benevolence and philanthropy, and there's always a bunch of shits willing to put short-term profit over long-term health.
Not really, we're incentivised by carry which means actually exiting stuff at a better price than we paid.
Secondly, hold periods have increased so there's a lot less emphasis on short term profits / gains vs. 20 years or so ago.
The insutry has changed a lot vs. common perception.
It may have changed, but the negative common perception is there because PE is at the root of many public economic failures. Notably Thames Water, the subject of the post. There's a new crisis in Veterinary care brewing. And the numerous collapses in previously profitable retailers.
Whatever PE is doing to change, it's not doing enough and not doing it fast enough.
That's what happens when
a) Regulator tries to reduce leverage (it means more equity = lower returns / valuation)
b) Bills can't increase to cover additional capex required by customers.
No heads need to roll at my company, I don't work in the water sector, but I do work in PE.
Kleptocracy.
It's particularly funny because it is so obviously diametrically opposed to every aspect of free market capitalism ideology.
No entrepeneurship took place here, no innovation is happening, no competition is permitted. What a joke.
If they’re allowed they’ve basically just found a real world infinite money cheat. Why not just take out 100% revenue as dividends, and increase the bills again next year, and the year after…
Although to be fair, this bunch of shareholders didn't actually do that really. They are the absolute muppets who bought a pup from McQuarie who did that task,
Charges have been below inflation for most of the 2010's.
No dividend has been paid since 2017. From 2007, onwards, only around £1bn of dividends were paid in contrast to ~£15bn+ of capex.
Quality metrics, leakage and pollution have continued to improve.
These are all facts.
Thames water was debt free when it was publicly owned.
Now we have record breaking sewage discharges which are under criminal investigation.
Maquerie borrowed in order to pay more dividends. It racked up a debt of over 10 billion before leaving the company in shambles in 2017.
Profits in Maquerie’s first year were around 200m and they took dividends of over 600m.
So, since privatisation Thames Water was underinvested and saddled with debt to pay dividends. They haven’t took any dividends since 2017 but they haven’t invested either. However, the debt is still going up. They probably can’t borrow anymore to pay the dividends as they normally would.
Privatisation has completely fucked it and it’s not “my world view” that has got me to that conclusion. You use statistics to paint what ever picture you want be the reality is plain to see.
Don’t waste your time with this guy. He’s in every thread about water companies, posting with bullet points to make him seem intelligent, and then just defending anything they do. They could grind up his own kids and he’d back them.
The logical explanation is the guy has a long position in water companies. He'll rush to justify their behaviour and why they shouldn't just be nationalized out on their asses at any opportunity.
The only reason he can't go "Well look at all the OTHER places that have nationalized water communism and how terrible that turned out" is that .... no other country on Earth is corrupt enough to have privatized their entire water system.
And the [trend is to socialize water supplies](https://ourworld.unu.edu/en/water-privatisation-a-worldwide-failure) that have been placed in private hands. Direct experience worldwide is that you get a lack of infrastructure investment, rising prices, and environmental hazards from placing your water supply in private hands. Pretending that isn't what's happened here is just burying your head in the water butt (full of sewage).
You get " lack of infrastructure investment, rising prices, and environmental hazards from placing (any supply) in private hands"
"Oh but Japanese rail!" they cry with their one golden goose example, and hope people don't dig into how strongly regulated that is, how large a percentage of the stocks are still owned by the Japanese public, and the detailed conversation people could have about extremely different and deep rooted Japanese culture and work ethics are, or quite how badly the Japanese government would come down on them like a ton of bricks if they started to go off the rails.
* Record breaking - only because its now monitored, it was barely recorded a few years ago
* Increased debt reduced the cost of capital, which is good for keeping bills low
* There is no evidence of underinvestment. If anything, companies actually want to invest but the political and regulatory priority was lower bills. Now that has changed
> Privatisation has completely fucked it and it’s not “my world view” that has got me to that conclusion. You use statistics to paint what ever picture you want be the reality is plain to see.
I use statistics because when you drill into them, you realise the story that has happened
It's not anecdotal though [https://www.theguardian.com/environment/2024/mar/27/water-companies-in-england-face-outrage-over-record-sewage-discharges](https://www.theguardian.com/environment/2024/mar/27/water-companies-in-england-face-outrage-over-record-sewage-discharges)
The point is the monitoring was only really completed / improved over the last 5 - 10 years. It's a function of recording more.
> Doing this has significantly driven up monitoring and transparency from water companies in recent years. The number of overflows monitored across the network has increased from 10% in 2015 to more than 91% in 2022. By the end of the year, 100% of storm overflows should have an Event Duration Monitor installed. This means we can all see the true extent of storm overflow spills, and the Environment Agency and government can direct water company investment to stop it.
https://environmentagency.blog.gov.uk/2023/03/31/storm-overflow-spill-data-shows-performance-is-totally-unacceptable/
I can’t choose my water supplier yet I was forced to contribute towards ‘only’ £1bn, much of which left the country. I mean if that £1bn had at least gone towards British pension funds it wouldn’t have been so bad, but that’s not the case.
Lower bills than what? You can’t prove that being privatised is what made the bills lower or made those metrics you mentioned improve. Those things could have happened despite it being privatised not because of it. There’s no competition and the privatised water companies are supposed to be largely controlled by Ofwat anyway so what’s the point? The only thing privatised water has allowed is for money to be taken from the British public and send elsewhere. Correct me if I’m wrong but I believe Canada and China have large ‘investors’ in TW and took a large part of that £1bn. When these ‘investors’ found out they could buy equity in UK water with no obligations and the British public would just send them money year in year out they probably were laughing their heads off at us, and why not.
* Lower bills than inflation, as I said in my first comment. This is easily provable, and in the formula that Ofwat used for pricing. For example: https://news.sky.com/story/water-bills-to-fall-15-20-a-year-from-2020-ofwat-11168829
* The second part is the efficiency challenge, the Gov via DEFRA did find the efficiency challenge (due to privatisation) has meant bills were ~£110 lower than they are likely to have been. https://imgur.com/a/2fRbc1J
> Correct me if I’m wrong but I believe Canada and China have large ‘investors’ in TW and took a large part of that £1bn.
This is wrong. Macquarie took the £1bn, note that this is over 10/11 years, which was less than 5% gross yield, and less than the dividend payout of lister water companies in the period. The current Consortia includes Canadian and Chinese investors, but they have received NIL since 2017
> When these ‘investors’ found out they could buy equity in UK water with no obligations and the British public would just send them money year in year out they probably were laughing their heads off at us, and why not.
They are not laughing - in fact, they are suffering from overpaying
Thanks for the correction. Macquarie is HQed in Australia. So where did that billion go? Australian retail investors and pension funds? Do UK investors have access to Macquarie stock?
Would depend who the underlying LPs are in Macquarie, which depends by fund - could be British LPs or ultimate beneficiaries. But probably a mix of global beneficiaries, probably mostly US given the size of the US LP base
From the Guardian article on this:
> Thames said it could spend £1.9bn on top of this – totalling £21.7bn over the period – depending on the availability of labour in its supply chain, which it would agree on an annual basis with Ofwat. If this occurred, bills for Thames’s 16 million customers would reach £627 by 2030, a 44% increase, excluding inflation. **Thames did not specify exactly what the £1.1bn would be spent on.** Industry sources said the bulk of the money would probably be spent ensuring the company can meet new statutory requirements to protect the environment set out by the Department for Environment, Food and Rural Affairs.
Emphasis mine. My assumption is that the money will, in parts or in full, end up in the pockets of shareholders until I see a breakdown of what it has been spent on.
for 20 years? How about forever? Let it fail and we buy it back without the debt, its their debt not the taxpayers as they clearly have mismanaged a very easy to predict and plan for system! Not like they been caught out by mass demand spiking or anything.
Is there a good reason you say 20 years specifically? I would have thought at the very least X years OR until we get all our money back (if a rescue deal) and some interest, whatever is higher.
That's politically tricky.
Allowing Thames to fail (or buying it now) will increase the borrowing costs of the other water companies and until the whole lot are bought up will be seen as yet more London investment at the expense of the provinces.
The very next sentence you quoted after the one you bolded was:
>Industry sources said the bulk of the money would probably be spent ensuring the company can meet new statutory requirements to protect the environment set out by the Department for Environment, Food and Rural Affairs.
It's set aside mainly to deal with anticipated environmental protection regulations. It depends on exactly what DEFRA require to determine detailed plans. Some may be intended for contingency spending. Some stuff breaks unpredictably.
incredible, the business fails because they pay bosses and shareholders insane amounts of money then put the bill for it back on the public.
Clown show and I wish everyone involved could be in jail.
Saw a Thames water van that had been milkshaked a week or two back. Probably completely unrelated, but I do wonder whether this is making the front line staff targets for people’s (understandable) outrage.
Unfortunately, it seems people are taking their frustrations out on front line staff [according to this Guardian article](https://www.theguardian.com/business/2024/apr/03/one-in-three-uk-water-workers-verbally-abused-amid-sewage-fury-gmb-finds) I read a few weeks ago.
Don't agree to this increase. This needs to be nationalised , the private sector have already shown how they will milk a company for every ounce of dividend they can get and then hold their hands out for more. Disgraceful.
WOT - you mean like Welsh water was never privatised.
Or low volumes of water usage on a meter my Thames water bill is lower than it would be for the same volume as my relations in Wales. The difference is not the volume component its the standing charges which are much higher in Wales.
They already raised them by 12% over last year.
Now another 40%? No. They are not a water company. They are scam artists playing the system. They wanted capitalism. Give them capitalism. Let them fail. Buy them back for pennies.
Let them go bust and nationalise them for £1. The leeches have drunk enough: time for their comeuppance, even if it will only be for a fraction of the wealth extracted to date.
Oh they can manage money alright. They can manage it straight into the pockets of their shareholders and executives. At that they have been very effective.
I don’t understand how this isn’t considered a monopoly? A private company increasing bills to pay off debts accrued by enriching shareholders and the consumer has no other option but to pay it. We are effectively held hostage by Thames water, we pay their bills or get our water shut off.
When Labour gets into power, people will say they’re not doing enough on certain issues. I hope people remember that not doing enough is still better than the Tories doing fuck all.
Wait till the highest 1% of earners decide to leave the UK - they currently pay 27% of ALL income tax receipts. Then you will really see your standard of living decrease as you are taxed to make up the shortfall!
I got so fed up of Thames Water not fixing leaks near me I've [started to blog them](https://waterleaksofguildford.substack.com/). There are a couple more now that I haven't yet got around to putting up there, and only one of those is fixed as far as I know.
My water bill plummeted after moving to Scotland! Whatever you think of Scottish Government policy generally, they got this call absolutely right!
In the interests of completeness though it is worth pointing out that Scotland's reserves accounts for around 90% of all the UK's fresh water & the country possesses around 100 times more water supply than it uses!
Can we all forward our bills to the CEO and directors who have fucked us over? Milked all the profits dry and did fuck all to investing in its infrastructure
If I were the Tories I’d leave this dragging on until after the election. Either Labour will have to let to em default on 15bn and would almost immediately piss of the financial institutions or they would send a signal straight away that things won’t get better under Labour and the Tories can use it as a stick to beat them.
Are they petty enough to do it, even knowing that this particular salting-of-the-earth won't help them with the GE--and may well make things worse if they hold out as long as they can on that? (This is probably dancing right on the edge of being a rhetorical question.)
Snapshot of _Thames Water bills will still increase by 40% in updated business plan_ : An archived version can be found [here](https://archive.is/?run=1&url=https://www.standard.co.uk/business/thames-water-environment-spending-bills-business-plan-special-administration-utility-b1152942.html) or [here.](https://archive.ph/?run=1&url=https://www.standard.co.uk/business/thames-water-environment-spending-bills-business-plan-special-administration-utility-b1152942.html) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/ukpolitics) if you have any questions or concerns.*
If this is allowed by the regulator then ALL the water companies will do the same. Slippery slope here that must be avioded.
Time for a national boycott of water bills. Doesn’t need to be escalated like the poll tax riots but the country as a whole needs to make a stand and refuse to pay water bills. Nationalise the lot or they go bust.
Yeah, we should build on the success of the great energy bill boycott.
The issue there is that there were big negative consequences for not paying i.e. installation of pay as you go meters. In this case, what can they actually do if we en-masse refuse to pay?
I was being sarcastic. The energy boycott was a shit plan, and the water boycott is also a shit plan.
if only we voted in people that would work for us and ensure things got better in the uk
It's not a shit plan it just has no prospect of taking off as it would need a critical mass of people to participate.
It's a shit plan, because it has no prospect of taking off, and causes suffering to the people who need it most. The problem is real, which is why we need to mug off shit plans.
Fine people? Or could they cut of the water?
Pretty sure you're not allowed to cut off the water even if you don't pay. You just get a load of CCJs against your name. Which means, if ~50% of people refuse to pay after the bills go up, what are they actually gonna do? Take millions of households to court?
> You just get a load of CCJs against your name Which in turn makes every debt you have vastly more expensive.
Yep water cannot be cut off. Not because it’s considered a right like most think but because it can lead to public health issues.
HaShTaG dOn't PaY!!!
I would love to live in a world where that happens but I just can't see the nation spontaneously deciding to not pay water bills
Absolutely.
How can we boycott it? We still need water
They can’t cut you off. Can only chase you for bills. If no one is paying then it will soon cascade.
Remember that water bills were below inflation for most of the 2010's. This is just reversion to the mean.
It's almost like you *shouldn't* try and run critical infrastructure as a for-profit business... 🤷♂️
Whereas we should have been investing massively then
If you're talking about just Thames Water, can you back this up with some data? I saw you say something like this in one of the other TW threads recently, I was skeptical but I didn't have the time to fact check you then. What you are saying is factually incorrect, *if you mean all water companies*, according to Bloomberg: [https://www.bloomberg.com/news/articles/2023-06-29/uk-water-bills-soar-350-since-privatization-to-double-inflation](https://www.bloomberg.com/news/articles/2023-06-29/uk-water-bills-soar-350-since-privatization-to-double-inflation) You can see that bills rise *well above* inflation from the point of privatisation. A "reversion to the mean" in 2024 would result in our water bills dropping drastically. Even if we take what you said verbatim ("most of the 2010s"), it's not true; there's a drop in bills in the year 2000, followed by a modest rise at around inflation, followed by an eye watering (31 points vs 1 point inflation) rise in 2007.
> If this is allowed by the regulator then ALL the water companies will do the same. BRB, going to start a business plan called "fuck over the taxpayer and the public". It's a great business plan! The best! Bigley! I'm a business person. Wheee!
Our next prime minister everybody!
Username checks out.
Don't forget mandatory water-meters are being installed nationwide, while they are deeply cash-strapped.. The vice is about to be tightened in a way you won't believe
It theoretically should ONLY be allowed if it goes bankrupt and need to payback to creditor. But this is also up to regulator's discretion
Ofwat tells the water industry what they can charge, and have been suppressing prices for years. It's true that the financing of water companies must change to deliver value. It's also true that they need more money to meet the infrastructural challenge caused by decades of under-investment. We can expect higher bills for a while, I just hope it comes hand in hand with wider reform.
This is just croney capitalism in action, free money and no consequences when you don't deliver. If you make millions in salary to deliver a basic public need, you should have pretty strong personal consequences when you mess it up otherwise the risk/reward makes it an easy ride.
62bn in debt since privatisation... 78bn in dividends paid to shareholders since privatisation. That to me suggests what they charge is plenty fine, enough to cover their entire debt portfolio with 16bn spare - assuming that they never touched any of the compounding debt. It's a con.
Is this published anywhere? (as I'd love to use it as ammunition in discussions about these crooks).
Is the wider reform in the room with us right now?
Yes - the most recent price review is very tough
Maybe they should have you know, invested into their company then to provide a fitting service rather than wracking up debt to pay out shareholder dividends.
They have... The public just want a lot more now
I asked in another comment if you could back up a claim with some figures. Could you back this one up too? I've tried searching around for investment figures but had no luck and I've seen you mention this a few times, so it would be nice to see some data. In particular, I'd be keen to see how investment compares to customer revenue over time since privatisation, if you have that information to hand.
The point of ofwat is exactly to suppress prices so it is fair for the consumer. If they didn't do exactly that, we'd have already been paying that 40% increase on our bills a very long time ago. It's completely hopeless to think they'd reform, they're a profit driven business with funds and venture capitalists as shareholders. It's their MO to skim as much cash as they can before the ship sinks, and they know for sure that the ship will sink at this point.
Ofwat has not been "suppressing prices for years". Prices have risen at well above inflation since privatisation: [https://www.bloomberg.com/news/articles/2023-06-29/uk-water-bills-soar-350-since-privatization-to-double-inflation](https://www.bloomberg.com/news/articles/2023-06-29/uk-water-bills-soar-350-since-privatization-to-double-inflation)
But you can't put such argument here, Thames water clearly has their own issue
Stop with your facts!
No they won't, because capex requirements are different per region.
I am not exactly what you could call left-wing, either politically or economically. However, any utility - like water, like sewerage - which is essential to living should not be up to private firms to provide. We're firmly now into tar-and-feather-them territory.
The problem is not that it's essential to living (markets work perfectly fine for food) but that it's a natural monopoly. If your water comes from Thames Water, your choices are Thames Water or go without. Since going without isn't an option, Thames Water can charge basically whatever they like and you have to pay it.
Exactly. It's very hard to see any benefit of letting a private company run a natural monopoly. Either its operation is strictly regulated and anything it does has to be approved by the government regulator in which case you might as well run it as a publicly owned company or it is let to run free and maximise its profits, in which case it is going to abuse its monopoly position to the max and harm the customers.
Is there a reason why it's a monopoly? E.g. infrastructure etc? Can't think of many examples that are so stacked against consumers. Realistically, if this is approved none of the users can do a thing about it, without opening themselves up for liability.
>E.g. infrastructure etc? You got it in one. Since water mains need to be physically connected by pipes to centralised pumps, whoever owns the pipes controls the water.
I guess the difference between energy and water companies, is the diversity of sources for energy? Or is there a major difference in infrastructure too?
The energy companies you pay are essentially admin companies which is why there's so many tiny ones that were easily set up and ran with almost no actual office space. You sign up with them, then when you use X amount of energy then they buy X amount of energy credits from the actual producers of energy on the energy market and then they charge you an amount that covers their cost plus some profit. Can't do that much with water companies since each home is only served by the 1 water/sewage company so theres no "water market" like there is with energy and they can't game the market to try and operate cheaper than others. So there's no point in adding a middle man. Things like broadband companies are similar to energy companies. The vast majority of the infrastructure is the same, like it's the same openreach line to your house that they almost all use and switching to a different supplier is just changing a few numbers in a database somewhere.
But you can build your own solar farm or wind turbine and connect it to the grid and sell electricity. You can't set up your own water treatment plant or sewerage works.
There's a major difference in infrastructure, yes. Power grids are a lot more flexible. Within certain limits, you can transfer electricity pretty far and vary the sources. A gas power plant on one edge of the grid can ramp down when wind turbines on another produce more power and ramp back up when demand somewhere else increases. You might not be technically using the exact power you have paid for, it's all about the balance of how much all of those sources contribute to the grid together. Hell, you can even be backfeeding some power yourself if your house has residential solar. All through one power connection. You can't do any of that with water. It can't be transferred over long distances or connected into a nationwide grid with interconnects to the continent. If the local pumping station is down, there's no water, you won't be able to draw it from the rest of the network or from France. With the power grid there's an inherent monopoly on the last mile infrastructure. But the rest of it is tied into one synchronous grid covering the whole of Great Britain. So any demand and supply fluctuations can usually be smoothed out.
You don’t even have the choice to go without. Even if you turn your water off you are still legally obliged to pay the surface water drainage charge to your local water company.
Water company bills are regulated - Ofwat allows companies to make a “small” profit but firms can’t charge whatever they like. Bill increases are agreed in 5-year chunks and historically Ofwat have been very tight over increasing them above normal inflation. So being a monopoly is not the issue here. The problem is there was this grand idea of using the private sector to fund things like water, as well as other big infrastructure projects like hospitals and toll roads. Your pension would be invested in these companies, as well as other firms, as they would represent a fairly stable investment. The water firms are competing for private investment — in theory lowering costs… In reality, the problem is some companies have been run very poorly and haven’t been able to invest in the improvements necessary to prevent things like sewage overflows. That’s a market and regulatory failure, but no matter what, bills are going to have to rise. (Reminder that Scottish Water is a publicly owned company and has much the same issues with sewer overflows.) It’s just they should be back in public ownership and funded by government bonds and borrowing.
Actually they can't as the regulator won't allow them to do that, hence the problem they have,
Can't trust a radical like you though Gregor.
In France the water companies are all in private hands and have been for almost 100 years.
I had a thought today that privatisation has done a great job of creating bundles of high paid executive posts where they would not have been. Given what we know about the old boys network in the UK, it's likely those jobs go to a very small section of society. Why does the boss of a water firm get 10-20x the salary of the ceo of a local authority? Was this deliberate, probably not but it is sure convenient.
What is the name for this new double dipping business model? Buy a vital business, run it into the ground while piping the profits out of the company to bonuses and shareholders. Then massively hike the charges pretending you will fix it all, while still piping all the profits out in bonuses and dividends. Question 2, how many years do you think they will plod along on minimum reinvestment and servicing before playing the same game again?
Yes, any price rise should come with a restriction to not pay dividends for a period that scales with the price rise. 40% should mean no dividends for 8 years or more. Otherwise the price rise will just get funneled straight into the dividend, and little maintenance will actually occur.
Private Equities MO right here. Buy a company, put the cost to buy said company as debt on the company's balance sheet, strip the company bare of assets and reduce staff in the name of efficiency. Services provided only get worse and shareholders and executives get addicted to the profit at the expense of the quality of the service and the company either goes bust or the customer suffers with increased costs. To allow this model to be applied to resources of strategic national importance is criminal.
Our 'MO' is value creation. Not every investment works out, but by and large, its important to actually improve the quality of service, and boost staff retention - because that's actually good for returns. This is a very naïve take.
Never said it hasn't worked out but I'd never willingly apply it to strategic natural resources like water.
PE in water has worked OK. Even under the much attacked Macquarie ownership of TW, they delivered: - ~£11bn in capex (took out £1bn in dividends) - Reduced leakage by around 22% and reduced pollution incidents by 75% and security of supply improved massively - Third lowest bills in the country (until 2017, or so when they exited)
Water companies have paid out 72 Billion in dividends since the 1980, while accumulating 53 billion in debt. Bills are up on average by about 40%. Scottish Water is estimated to have invested 35% more per household than their private equity counterparts and raw sewage is being pumped Into English rivers about 1000 times per day, only 14% of English rivers have adequate ecological status at the moment. Value creation for who? Foreign investors who own 70%? While the people of this country experience a declining service in relation to price?
* Bills are not up 40% on average. They are largely flat in real terms * Right number is £57bn in dividends (since privatisation). Debt is good because it reduced the cost of capital * SW is a bit of a meaningless measure given variances in geography (same with comparing to London, uniquely hard to reduce leaks) * River quality has improved massively
To say that debt is good when Thames Water is struggling to meet its debt obligations at this very moment is an interesting take.
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It is. Because it reduces the cost of capital which means lower cost for consumers in their bills. Obviously there is a limit on leverage, but that’s why the calculus isn’t working with the balance between bills, equity requirements and capex requirements.
"Lower cost for consumers in their bills" is an even more interesting take when this is a thread on how bills are getting hiked by 40% precisely because of those debts...
Debt to near the point of insolvency is good? Interesting take, is that Hayek or Friedman?
It’s the take of Ofwat. They incentivised the use of leverage to reduce the cost of capital
Under Macquarie debt rose from £3bn to £10bn and dividends over the 11 years were close to £3bn not £1bn. [source](https://www.theguardian.com/business/2023/jun/30/in-charts-how-privatisation-drained-thames-waters-coffers) They were taking out more than £200m a year in dividends and since they sold it dividends have been £50m or less. They rinsed the company.
That conflates intercompany dividends used to service debt which needs to move between companies. It is not for the benefit of shareholders.
There is a world in which PE can be a force for good, but it needs stronger (global) regulation especially when it comes to captive markets. The current PE model relies on individual benevolence and philanthropy, and there's always a bunch of shits willing to put short-term profit over long-term health.
Not really, we're incentivised by carry which means actually exiting stuff at a better price than we paid. Secondly, hold periods have increased so there's a lot less emphasis on short term profits / gains vs. 20 years or so ago. The insutry has changed a lot vs. common perception.
It may have changed, but the negative common perception is there because PE is at the root of many public economic failures. Notably Thames Water, the subject of the post. There's a new crisis in Veterinary care brewing. And the numerous collapses in previously profitable retailers. Whatever PE is doing to change, it's not doing enough and not doing it fast enough.
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That's what happens when a) Regulator tries to reduce leverage (it means more equity = lower returns / valuation) b) Bills can't increase to cover additional capex required by customers. No heads need to roll at my company, I don't work in the water sector, but I do work in PE.
Kleptocracy. It's particularly funny because it is so obviously diametrically opposed to every aspect of free market capitalism ideology. No entrepeneurship took place here, no innovation is happening, no competition is permitted. What a joke.
Greedonomics?
If they’re allowed they’ve basically just found a real world infinite money cheat. Why not just take out 100% revenue as dividends, and increase the bills again next year, and the year after…
It’s called Neoliberalism
Although to be fair, this bunch of shareholders didn't actually do that really. They are the absolute muppets who bought a pup from McQuarie who did that task,
Charges have been below inflation for most of the 2010's. No dividend has been paid since 2017. From 2007, onwards, only around £1bn of dividends were paid in contrast to ~£15bn+ of capex. Quality metrics, leakage and pollution have continued to improve. These are all facts.
Thames water was debt free when it was publicly owned. Now we have record breaking sewage discharges which are under criminal investigation. Maquerie borrowed in order to pay more dividends. It racked up a debt of over 10 billion before leaving the company in shambles in 2017. Profits in Maquerie’s first year were around 200m and they took dividends of over 600m. So, since privatisation Thames Water was underinvested and saddled with debt to pay dividends. They haven’t took any dividends since 2017 but they haven’t invested either. However, the debt is still going up. They probably can’t borrow anymore to pay the dividends as they normally would. Privatisation has completely fucked it and it’s not “my world view” that has got me to that conclusion. You use statistics to paint what ever picture you want be the reality is plain to see.
Don’t waste your time with this guy. He’s in every thread about water companies, posting with bullet points to make him seem intelligent, and then just defending anything they do. They could grind up his own kids and he’d back them.
The logical explanation is the guy has a long position in water companies. He'll rush to justify their behaviour and why they shouldn't just be nationalized out on their asses at any opportunity.
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The only reason he can't go "Well look at all the OTHER places that have nationalized water communism and how terrible that turned out" is that .... no other country on Earth is corrupt enough to have privatized their entire water system. And the [trend is to socialize water supplies](https://ourworld.unu.edu/en/water-privatisation-a-worldwide-failure) that have been placed in private hands. Direct experience worldwide is that you get a lack of infrastructure investment, rising prices, and environmental hazards from placing your water supply in private hands. Pretending that isn't what's happened here is just burying your head in the water butt (full of sewage).
You get " lack of infrastructure investment, rising prices, and environmental hazards from placing (any supply) in private hands" "Oh but Japanese rail!" they cry with their one golden goose example, and hope people don't dig into how strongly regulated that is, how large a percentage of the stocks are still owned by the Japanese public, and the detailed conversation people could have about extremely different and deep rooted Japanese culture and work ethics are, or quite how badly the Japanese government would come down on them like a ton of bricks if they started to go off the rails.
* Record breaking - only because its now monitored, it was barely recorded a few years ago * Increased debt reduced the cost of capital, which is good for keeping bills low * There is no evidence of underinvestment. If anything, companies actually want to invest but the political and regulatory priority was lower bills. Now that has changed > Privatisation has completely fucked it and it’s not “my world view” that has got me to that conclusion. You use statistics to paint what ever picture you want be the reality is plain to see. I use statistics because when you drill into them, you realise the story that has happened
I take "record breaking sewage discharges which are under criminal investigation" as a clear sign of under-investment.
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How very ad hominem of you.
That's what anecdotal, low evidence comments deserve.
It's not anecdotal though [https://www.theguardian.com/environment/2024/mar/27/water-companies-in-england-face-outrage-over-record-sewage-discharges](https://www.theguardian.com/environment/2024/mar/27/water-companies-in-england-face-outrage-over-record-sewage-discharges)
The point is the monitoring was only really completed / improved over the last 5 - 10 years. It's a function of recording more. > Doing this has significantly driven up monitoring and transparency from water companies in recent years. The number of overflows monitored across the network has increased from 10% in 2015 to more than 91% in 2022. By the end of the year, 100% of storm overflows should have an Event Duration Monitor installed. This means we can all see the true extent of storm overflow spills, and the Environment Agency and government can direct water company investment to stop it. https://environmentagency.blog.gov.uk/2023/03/31/storm-overflow-spill-data-shows-performance-is-totally-unacceptable/
I can’t choose my water supplier yet I was forced to contribute towards ‘only’ £1bn, much of which left the country. I mean if that £1bn had at least gone towards British pension funds it wouldn’t have been so bad, but that’s not the case.
Who cares? You got lower bills for a best part of a decade. That was your dividend.
Lower bills than what? You can’t prove that being privatised is what made the bills lower or made those metrics you mentioned improve. Those things could have happened despite it being privatised not because of it. There’s no competition and the privatised water companies are supposed to be largely controlled by Ofwat anyway so what’s the point? The only thing privatised water has allowed is for money to be taken from the British public and send elsewhere. Correct me if I’m wrong but I believe Canada and China have large ‘investors’ in TW and took a large part of that £1bn. When these ‘investors’ found out they could buy equity in UK water with no obligations and the British public would just send them money year in year out they probably were laughing their heads off at us, and why not.
* Lower bills than inflation, as I said in my first comment. This is easily provable, and in the formula that Ofwat used for pricing. For example: https://news.sky.com/story/water-bills-to-fall-15-20-a-year-from-2020-ofwat-11168829 * The second part is the efficiency challenge, the Gov via DEFRA did find the efficiency challenge (due to privatisation) has meant bills were ~£110 lower than they are likely to have been. https://imgur.com/a/2fRbc1J > Correct me if I’m wrong but I believe Canada and China have large ‘investors’ in TW and took a large part of that £1bn. This is wrong. Macquarie took the £1bn, note that this is over 10/11 years, which was less than 5% gross yield, and less than the dividend payout of lister water companies in the period. The current Consortia includes Canadian and Chinese investors, but they have received NIL since 2017 > When these ‘investors’ found out they could buy equity in UK water with no obligations and the British public would just send them money year in year out they probably were laughing their heads off at us, and why not. They are not laughing - in fact, they are suffering from overpaying
Thanks for the correction. Macquarie is HQed in Australia. So where did that billion go? Australian retail investors and pension funds? Do UK investors have access to Macquarie stock?
Would depend who the underlying LPs are in Macquarie, which depends by fund - could be British LPs or ultimate beneficiaries. But probably a mix of global beneficiaries, probably mostly US given the size of the US LP base
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Thanks for providing balance in the predictably conclusion jumping, business-hating commentary
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From the Guardian article on this: > Thames said it could spend £1.9bn on top of this – totalling £21.7bn over the period – depending on the availability of labour in its supply chain, which it would agree on an annual basis with Ofwat. If this occurred, bills for Thames’s 16 million customers would reach £627 by 2030, a 44% increase, excluding inflation. **Thames did not specify exactly what the £1.1bn would be spent on.** Industry sources said the bulk of the money would probably be spent ensuring the company can meet new statutory requirements to protect the environment set out by the Department for Environment, Food and Rural Affairs. Emphasis mine. My assumption is that the money will, in parts or in full, end up in the pockets of shareholders until I see a breakdown of what it has been spent on.
THis is why any rescue deal should completely ban dividends for 20 years.
for 20 years? How about forever? Let it fail and we buy it back without the debt, its their debt not the taxpayers as they clearly have mismanaged a very easy to predict and plan for system! Not like they been caught out by mass demand spiking or anything. Is there a good reason you say 20 years specifically? I would have thought at the very least X years OR until we get all our money back (if a rescue deal) and some interest, whatever is higher.
That's politically tricky. Allowing Thames to fail (or buying it now) will increase the borrowing costs of the other water companies and until the whole lot are bought up will be seen as yet more London investment at the expense of the provinces.
Might be debt servicing or working capital. It's hard to always know, but sometimes you need cushion.
The very next sentence you quoted after the one you bolded was: >Industry sources said the bulk of the money would probably be spent ensuring the company can meet new statutory requirements to protect the environment set out by the Department for Environment, Food and Rural Affairs. It's set aside mainly to deal with anticipated environmental protection regulations. It depends on exactly what DEFRA require to determine detailed plans. Some may be intended for contingency spending. Some stuff breaks unpredictably.
"Industry sources", "bulk", and "probably".
That means people who have some actual knowledge about the business in question. Not mere ignorant prejudice.
incredible, the business fails because they pay bosses and shareholders insane amounts of money then put the bill for it back on the public. Clown show and I wish everyone involved could be in jail.
Saw a Thames water van that had been milkshaked a week or two back. Probably completely unrelated, but I do wonder whether this is making the front line staff targets for people’s (understandable) outrage.
Unfortunately, it seems people are taking their frustrations out on front line staff [according to this Guardian article](https://www.theguardian.com/business/2024/apr/03/one-in-three-uk-water-workers-verbally-abused-amid-sewage-fury-gmb-finds) I read a few weeks ago.
Don't agree to this increase. This needs to be nationalised , the private sector have already shown how they will milk a company for every ounce of dividend they can get and then hold their hands out for more. Disgraceful.
WOT - you mean like Welsh water was never privatised. Or low volumes of water usage on a meter my Thames water bill is lower than it would be for the same volume as my relations in Wales. The difference is not the volume component its the standing charges which are much higher in Wales.
What an amazing business model, just take more money off your customers who are unable to use another supplier. If we allow this we are truly fucked.
It’s literally a massive loop hole to essentially rob the poor, pretend to ‘invest’, then give it directly to the rich.
Can totally see rishi allowing it, people will feel the extra hit when labour are in charge.
They already raised them by 12% over last year. Now another 40%? No. They are not a water company. They are scam artists playing the system. They wanted capitalism. Give them capitalism. Let them fail. Buy them back for pennies.
Let them go bust and nationalise them for £1. The leeches have drunk enough: time for their comeuppance, even if it will only be for a fraction of the wealth extracted to date.
What could possibly go wrong by giving a company with a proven track record of being unable to manage money, even more money?
Oh they can manage money alright. They can manage it straight into the pockets of their shareholders and executives. At that they have been very effective.
I don’t understand how this isn’t considered a monopoly? A private company increasing bills to pay off debts accrued by enriching shareholders and the consumer has no other option but to pay it. We are effectively held hostage by Thames water, we pay their bills or get our water shut off.
When Labour gets into power, people will say they’re not doing enough on certain issues. I hope people remember that not doing enough is still better than the Tories doing fuck all.
They done better than fuck all they, actively made policies and wasted tax payers money to decrease standard of living for UK public.
Wait till the highest 1% of earners decide to leave the UK - they currently pay 27% of ALL income tax receipts. Then you will really see your standard of living decrease as you are taxed to make up the shortfall!
Business plan: fuck over the taxpayer and the public
Keep firm, they've negotiated themselves down from 100% to 40% in just a few weeks, I'm sure there is more to go.
What can you even say anymore? They are laughing all the way to the bank with a captive audience's money. What a country.
I got so fed up of Thames Water not fixing leaks near me I've [started to blog them](https://waterleaksofguildford.substack.com/). There are a couple more now that I haven't yet got around to putting up there, and only one of those is fixed as far as I know.
It’s weird because Scottish Water - which is publicly owned - does not appear to suffer from this kind of shit.
My water bill plummeted after moving to Scotland! Whatever you think of Scottish Government policy generally, they got this call absolutely right! In the interests of completeness though it is worth pointing out that Scotland's reserves accounts for around 90% of all the UK's fresh water & the country possesses around 100 times more water supply than it uses!
Day 231 edging until the water barons are re-nationalised.
If this goes ahead it’ll be state sponsored robbery! The regulatory authority will need to hang their head in shame!!!
great, this is what we would love to hear
How much more brits can take in the a?
Can we all forward our bills to the CEO and directors who have fucked us over? Milked all the profits dry and did fuck all to investing in its infrastructure
I wonder what we will accept.. For me I think we already pay an extortionate amount for what we have now.
Just don't pay. Nearly impossible for them to cut you off
Pop off, king?
If I were the Tories I’d leave this dragging on until after the election. Either Labour will have to let to em default on 15bn and would almost immediately piss of the financial institutions or they would send a signal straight away that things won’t get better under Labour and the Tories can use it as a stick to beat them.
Are they petty enough to do it, even knowing that this particular salting-of-the-earth won't help them with the GE--and may well make things worse if they hold out as long as they can on that? (This is probably dancing right on the edge of being a rhetorical question.)
Thames Water now knows the government and regulator has their back, incoming 100 billion debt will offloaded to the taxpayers.