There is a clue below!

There is only one bill we all receive and can’t avoid – and it’s on the Monopoly Board. We all have no choice but to buy our water supply from SES Water plc, a public company currently owned by the Pennon Group. This is the same business that owns South West Water, guilty of numerous pollution issues and the company that was responsible for the Brixham water pollution issue.

SES Water dates back to Victorian times and is an amalgamation of a number of small local water companies and supplies water to 750,000 people in parts of Surrey, Kent, West Sussex and South London.

It gets most of its water from bore holes sunk into the North Downs.

Privatisation in 1989

Older readers may remember that Margaret Thatcher privatised water companies in 1989. Although SES Water was always a private company many of the larger suppliers were publicly owned. But whilst originally being locally owned, SES Water became of interest to foreign investors, initially the German Deutsche Bank and since 2013 by Japanese Sumitomo Corporation and Osaka Gas, until it was sold to Pennon earlier this year. Or nearly sold, as the Competition and Markets Authority has raised objections. They are  concerned that this deal “could impact Ofwat’s ability to make comparisons and carry out its role of regulating the water sector.”

Water Meters

It has also been forcing customers to install water meters, something it is allowed to do under the Water Industry Act 1991 because we live in an area  deemed to be in serious water stress by the Secretary of State.

Whilst this is intended to reduce water usage it inevitably leads to increased bills.

Executive Salaries

In the past, despite foreign ownership, SES Water has continued to be a locally focused and customer orientated company but is this likely to continue when Pennon is in control? Last year the Pennon Group plc paid its Chief Executive £860,000, was fined £2.15 million for sewage spills, currently has debts of £3.5 billion and increased the dividends paid to shareholders by 3.8%.

And SES Water has not been far behind in terms of executive salaries. The Chief Executive of SES Water, Ian Kerr, was paid £544,000 last year and his payments over the past five years amounted to £2.367 million. A company employing only 345 people with huge debts.

£78 billion paid in dividends by water companies since privatisation

According to The Financial Times, “Since privatisation, Britain’s (16) water companies  have paid £78 bn in dividends , nearly half of the £190 bn invested in infrastructure. The utilities meanwhile chalked up more than £64 bn net in debt over the same period, despite being sold at privatisation with no debt.”

Is foreign ownership the problem?

Could foreign ownership be the problem? – buying companies to produce short term returns by way of dividends and neglecting long term infrastructure improvements. Presumably the highly paid senior management have been rewarded based on dividends paid rather than performance and service.

So what is the solution?

It’s a dilemma for us consumers as it is one service we all need. The water companies will say increasing the costs to us, their consumers. Without a doubt we will see an increase in our bills, but we need to see some Government intervention to protect this essential industry.

One option might be to re-nationalise the water industry, but this will mean the State having to pay off the huge amount of debt that the industry has accumulated and possibly paying the existing shareholders for their shares. Instead, maybe there needs to be some more creative legislation that forces investment in infrastructure that is desperately needed and prevents shareholders from taking dividends until the debts have been cleared.  It might also be useful to introduce some control over the payments made to senior management.

Another idea, being proposed by the Liberal Democrats, is to convert water companies into US-style “Public Benefit Companies”. It is not clear how this would work but clearly something needs to happen before one of these companies fails and our water supply is interrupted.

Sorry we can’t offer an easy solution but please be aware that our water supply may be at risk unless there is a major overhaul of the industry.

Note: SES Water only supplies water, it does not deal with the disposal of waste water and sewage as do most water companies. In our area Thames Water is responsible for waste water and sewage although the cost is included in our SES Water bill. Thames Water is currently £14.7 billion in debt.