Environmental Law News Update

In this latest Environmental Law News Update, Amy Taylor and Peter Cruickshank consider recent financial penalties announced by Ofwat, as well as Nutrient Neutrality.

Financial penalties announced by Ofwat

Ofwat announced on 6 August 2024 that three water companies face penalties totalling £168 million for failing to manage their wastewater treatment works and networks. This follows Ofwat’s biggest ever investigation and is only the first batch of outcomes; Ofwat continues to investigate eight other companies.

The penalties proposed for consultation are Thames Water fined £104m, Yorkshire Water fined £47m, and Northumbrian Water fined £17m. The financial penalty that Ofwat can impose cannot exceed 10% of the relevant company’s turnover (Water Industry Act 1991, section 22A(11)).

Although the scale of the breaches differ between these companies, each company has demonstrated a “catalogue of failure…in how they ran their sewage works”, according to Ofwat’s Chief Executive David Black, and they have:

• failed to ensure that discharges of untreated wastewater from storm overflows occur only in exceptional circumstances
• not properly operated and maintained their wastewater treatment works.
• failed to upgrade assets, where necessary, to ensure they meet the changing needs of the local area they serve.
• been slow to understand the scope of their obligations relating to limiting pollution from storm overflows.

Ofwat is consulting on proposed enforcement orders to require each company to rectify the problems identified by Ofwat.

Many welcome the news that these companies are facing huge fines. However, this raises further questions about how much some companies can afford to invest in infrastructure. Thames Water has been struggling with debts and announced earlier this year it only had sufficient funds to cover operations until the end of May 2025. Water companies have been proposing to pay for upgrades by raising customer bills by more than 44% over five years, and the bill increase has been restricted by Ofwat. There are concerns that the money from customer’s bills is not being sufficiently invested in improving infrastructure, and there are calls for a ban on executive bonuses if they have not been sufficiently earned or if the company has committed serious criminal breaches.

Let’s hope these financial penalties encourage these companies, and others, to take action to counter the challenges of climate change, population growth, urbanisation, and emerging pollutants.

Nutrient neutrality

C.G. Fry & Son Ltd v Secretary of State for Levelling Up, Housing and Communities [2024] EWCA Civ 730. We recently wrote about CG Fry and Sons’ High Court challenge to the nutrient neutrality rules in July, and also in October last year.

Nutrient neutrality again appeared in Ward v Secretary of State for Housing, Communities and Local Government [2024] EWHC 1780 (Admin). Travellers applied for planning permission in 2018 for one residential unit and a stable block at a site in Sussex. The Committee of the LPA refused permission in 2019, against the officer’s recommendation, citing it was not in a sustainable location and not readily accessible by public transport. The appeal to the Planning Inspectorate took time, the Covid pandemic of 2020 cited as a cause of delay, with the hearing in May 2022. The inspector found that it was in a sustainable location having regard to relevant facilities, given its small scale. Thus, the planning objections by the LPA were overcome. But, nutrient neutrality, not an issue before the Committee, arose during the currency of the appeal to the Planning Inspectorate, following Natural England’s Guidance (which had been in issue in the CG Fry and Sons case).

The LPA argued that there was no evidence that the development could achieve water neutrality and therefore it could not be concluded that it would not have a likely significant effect on the local protected sites. For the appellants, it was argued that because they occupied the Site prior to the publication of the Natural England Guidance, that obviated the need for an appropriate assessment because the development would simply maintain the status quo with regard to water consumption. Written representations were requested from Natural England, who disagreed with the appellant’s position. The inspector concluded an appropriate assessment under Regulation 63 was required, and relied on Natural England’s representations. The appeal was dismissed.

The High Court dismissed the appeal: the inspector had been entitled to rely upon Natural England’s representations, and had considered the appellant’s case carefully. He said it was not enough to simply say that the status quo was being maintained so there was no need for a statement. He gave a direction after the hearing asking for a water neutrality statement to be prepared, and the appellants did prepare one, but in it argued as before, that prior occupation obviated the need for an appropriate assessment. The inspector then consulted Natural England, and was entitled to rely on their representations.

Both of these cases demonstrate the centrality of undertaking appropriate assessments when watercourses are in issue, and more widely, that the rules on nutrient neutrality are being enforced by both the planning inspectorate and the courts.