Water regulator Ofwat is in the High Court today in Manchester in a Judicial Review brought by campaign group River Action which argues that Ofwat acted unlawfully because its approach has potentially allowed water companies to charge bill payers twice for the same infrastructure improvements that should have been carried out years ago.

The specialist court sits within the King’s Bench Division of the High Court of Justice and is based at the Royal Courts of Justice, London and also at centres in Birmingham, Cardiff, Leeds and Manchester.

River Action says that at the heart of the case is Ofwat’s 2024 Price Review (PR24), which approved above inflation bill increases – averaging £123 a year per household – and authorised “enhancement expenditure” for water companies to upgrade wastewater treatment works and pumping stations including to meet their legal obligations.

The case uses United Utilities and Lake Windermere as a case study, but the campaign group believe the claim has uncovered issues with Ofwat’s approach across England and Wales.

Ofwat’s own policy is that customers should not pay twice for enhancement schemes.

River Action claim that Ofwat acted unlawfully when it implemented its policy because its approach has allowed costs to be passed to customers without ensuring the funds actually deliver promised improvements rather than merely correcting historic underinvestment.

In effect, they argue that Ofwat’s approach has likely allowed for paying twice, with some households having to pay for infrastructure improvements to achieve environmental compliance, which should have been funded from historic bill payments.

River Action Head of Legal, Emma Dearnaley, said:

“It is fundamental that the public should not be made to pay twice for water companies’ past failures to invest in improvements to stop sewage pollution. But River Action is concerned that Ofwat’s approach means customers could be paying again. Meanwhile, degraded infrastructure keeps spewing pollution into rivers and lakes across the country that should have been clean decades ago. The regulator must ensure that the billions it approves results in legal compliance by water companies and that customers are charged fairly from now on. We cannot fix the sewage crisis or restore public trust until we have regulation that delivers for billpayers and the environment. ”

Legal grounds: flawed approach and weak enforcement by Ofwat

Represented by law firm Leigh Day, River Action will argue that:

• Ground 1: Ofwat’s approach to implementing its own “not paying twice” policy was unlawful.
• Ground 2: Ofwat ‘clawback’ mechanism to recover funds if water companies misuse customer money is flawed and incomplete.

Leigh Day partner Ricardo Gama, who represents River Action, said:

“Our client believes that this case shows that Ofwat has failed to make sure that water bills are used for infrastructure upgrades. River Action will argue that the money that could and should have been used to make essential infrastructure improvements is now gone, and customers are being asked to foot the bill for those improvements a second time over.”

Case with national implications

Although the legal challenge focuses on the PR24 determination for United Utilities and the Windermere schemes,River Action believe the outcome has national significance.

“The case aims to expose systemic failures in how Ofwat oversees compliance across the entire water industry and how it routinely signs off funding that could allow water companies to use customers’ money to rectify their own past non-compliance,” River Action says..

LakeWindermere - a case study for a national problem

In River Action’s view, Lake Windermere, described as the “jewel in the crown” of the Lake District, has become a symbol of the crisis in England’s waterways. Despite being a designated protected site, monitoring data shows thousands of hours of sewage discharges every year from nearby treatment works and pumping stations.

The legal case uses Windermere as a case study to illustrate a national problem. If such failures can happen at one of the country’s most iconic lakes, the charity argues, they are likely happening across the network of water and sewerage systems in England and Wales.

“Our concern with Ofwat’s approach to implementing its own ‘not paying twice’ policy extends across all of the 4,000 schemes it has approved across England and Wales,” River Action says.

Beyond the courtroom: a call for regulatory reform

The legal challenge is part of the group’s broader campaign to reform how water regulation works in the UK, which argues that Ofwat, as currently structured, has become “too close to the companies it regulates and too distant from the public interest it is meant to serve.”

According to the NGO, since the case was filed, the Independent Water Commission has also raised many of its concerns, calling for a major overhaul of the regulation of water services in England and Wales with a new single integrated regulator replacing the current fragmented system (including Ofwat) and with long-term infrastructure investment and asset health being central to making the system fit for the future.

River Action comments:

“Crucially, the outcome of this case should have profound consequences for PR29, the next five-year regulatory review. PR29 must not repeat the same failures of PR24. A reformed, well-resourced and robust regulator – with Ofwat’s current structure and functions expected to be abolished and included in the new regulator following the Commission’s recommendations – must ensure full environmental compliance by water companies before customers are asked to pay.”

The High Court hearing takes place at Manchester Civil Justice Centre over the next two days - River Action is represented by law firm, Leigh Day, and barristers David Wolfe KC and Nicholas Ostrowski.

According to a report on the BBC Radio 4 Today programme this morning, Ofwat has rejected the claims by River Action and will make its case in court arguing it has safeguards and monitoring in place.