Environment Secretary of State's letter to Ofwat outlining concerns on proposals to recapitalise Thames Water
Published 16 June 2026
Applies to England
© Crown copyright 2026
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Dear Iain,
L&VW Consortium best and final offer
I write to you regarding the London and Valley Water Consortium’s best and final offer (“the Proposal”) received on 6th March 2026. We are grateful to Ofwat for keeping Defra officials updated regarding progress.
We note that the Consortium’s letter emphasises its commitment to constructive, good faith engagement with the Government and regulators, and refers to the importance of clear Government and Ofwat support to maintain investor confidence.
I understand that Ofwat, as the independent regulator, is looking to reach a decision on the Proposal shortly and would welcome my preliminary views in advance of doing so. These views do not predetermine any future decision that Ofwat may choose to make, and this letter should not be taken as, and does not constitute, a direction from HMG.
Section 2 of the Water Industry Act 1991 places a duty on both Ofwat and me to exercise our respective relevant functions in the manner best calculated to further or achieve certain objectives. This includes protecting consumers, securing the proper delivery of water and sewerage services, ensuring that companies can finance those services and that statutory obligations are properly carried out.
To this end, as explained in the third paragraph of this letter, I set out below my preliminary views regarding the Proposal and its interaction with those section 2 duties.
The Proposal expects consumers to fund an unprecedented level of regulatory adjustments. These measures include, but are not limited to, prioritising asset health over capital improvements, switching off parts of the penalty regime, and amending risk-sharing mechanisms. I am not yet convinced that the Proposal demonstrates sufficient protection for consumers’ interests. I understand that there will be some bill impacts in this price review period and further rises in the next period as a direct result of these regulatory adjustments. I am concerned that consumers will ultimately bear an undue cost for these adjustments. The Proposal also requests reduced performance standards, impacting both the environment and consumers.
The Proposal suggests that a significant number of investments would be deferred, in some cases by up to a decade. This would mean delays to environmental improvements, particularly those related to wastewater treatments linked to statutory requirements and to projects important to drinking water safety and supply. I am concerned that the long-term resilience of water and wastewater systems may not be adequately protected.
I would like to acknowledge the significant effort that Ofwat, and the Consortium have put into discussing and developing the Proposal. I am sharing my views and concerns for Ofwat’s consideration.
I am copying this letter to the London and Valley Water Consortium [REDACTED] and [REDACTED] Thames Water [REDACTED].
Yours sincerely,
THE RT HON EMMA REYNOLDS MP