Utility Week

16 | NOVEMBER 2022 | UTILITY WEEK Water Analysis Is Defra getting serious or just playing to the gallery? The new environment secretary has talked tough on fines for water firms that pollute the environment. But is a £250 million sanction for a water company ever actually likely to be issued? W ater companies have been le in no doubt that the latest govern- ment expects rapid and meaningful action on reducing pollution incidents – or consequences will be felt. There was no clearer indication of this than the astonishing intervention made by the secretary of state at the Department for Environment, Food and Rural Affairs (Defra) at the Conservative Party Conference in October. Ranil Jayawardena pledged to allow the Environment Agency (EA) to increase the maximum civil sanction it can impose on water companies "who pollute the environ- ment" from £250,000 to £250 million. To put this 1,000-fold increase in con- text, the total fines resulting from EA crimi- nal prosecutions against water companies in the past seven years is £138 million. This includes the current record £90 million pen- alty levied against Southern Water last year for corporate environmental crime. Defra justified the move by saying that civil penalties "can offer a quicker method of enforcement" than criminal prosecution. It stressed that these would be issued only for "more serious offences, including when there is evidence of negligence or misman- agement or when there is an environmental impact". Jayawardena said: "I have been clear that if water companies don't do what is expected, there will be consequences. Big- ger financial penalties will act as a greater deterrent and push water companies to do more, and faster, when it comes to investing in infrastructure and improving the quality of our water. "This 1,000-fold increase sends a clear signal that we want clean rivers and coastlines, and that the duty falls to the water companies to deliver – the polluter must pay." While the EA has professed itself "delighted" at the move, which is still sub- ject to consultation, experts have questioned whether such extreme fines could ever be successfully applied and what the process would be. Water companies themselves have been reluctant to speak publicly about the pro- posal, although one senior figure suggested to Utility Week that it was "bluster and bra- vado" from Jayawardena and they did not anticipate such fines to be issued. They stressed that the level of sanctions being proposed would go beyond impacting prof- its and could jeopardise companies' abil- ity to supply water and fulfil their licence requirements. One executive at a water company described the proposals as a "monumental distraction and a play to the gallery". They told Utility Week: "Regulation is already working and has meted out some very significant fines. The civil sanctions regime works really well in that you get bet- ter outcomes from the approach. That has tended to be the approach the EA histori- cally has taken, which enables you to work through undertakings and actually deliver a better outcome on the ground. "This proposal risks further polarising the debate. It is playing into the misinformation in this debate and realistically isn't going to drive the step change in behaviour and per- formance required. The underlying issues are actually about investment certainty and mechanisms to deliver. It's not about people playing the system." The current state of play Discharging pollution into waterways breaches environmental permits and has for many years been a criminal offence, sub- ject to prosecution in cases deemed serious enough. For lesser offences, the EA has the power to impose civil penalties, ranging from fixed monetary fines for offences deemed lower level; variable monetary penalties for more serious breaches that are not consid- ered serious enough to warrant criminal prosecution; and enforcement undertak- ings where a company informs the EA of a breach and agrees with the agency how they will remedy it. This usually means money going directly to help the area affected by pollution. The monetary penalties can be up to £250,000 at present, while the highest enforcement undertaking is £1 million. For incidents deemed more severe, the proceed- ings are dealt with through the criminal courts and could lead to higher fines and custodial sentences. Michael Barlow, partner at Burgess Salmon, tells Utility Week that civil penal- ties were intended to fill the gap between non-enforcement of regulatory breaches and the threshold at which criminal proceed-

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