“We want to see executive pay linked to performance,” he added. “If we don’t see the kind of action that we’re expecting in terms of linking dividends and executive pay to performance, then we will make licence changes.”
Ofwat has powers to fine companies that are in breach of their operational licences, which could be changed to explicitly require a link between environmental performance and payouts.
The regulator has been criticised by MPs on the environmental audit committee, who called for “more assertive” action in a recent report on the poor state of England’s rivers.
The report called for Ofwat to require water companies to deliver year-on-year reductions in pollution incidents, with a target of zero serious incidents by 2030.
Mr Black insisted that the industry was “endeavouring” to improve its environmental record but added that the regulator “won’t hesitate” to pursue further action if they fail to do so.
Water bills increase
He also pushed back on arguments from the industry that water bills would need to increase in order to pursue investment to fix sewage spills.
“I certainly do not accept the need to wait another three years to the next price review. They have their levels of funding now. They’re responsible to comply with the obligations,” he said.
“They need to respond to public concerns. This cuts right to the heart of what they do. This is really about trust for customers.”
However, he said it was “too soon” to say whether customer bills would ultimately have to rise to deal with the challenge.
He also called for a shift in householders’ attitude to what they flush down the loo, and for the Government to ban plastic wet wipes, which can block sewers.
But he acknowledged it was a “fair question” to ask why bills should have to go up when company payouts remained high.
In 2020 the regulator announced an investigation into England’s water companies after new evidence suggested they had illegally released sewage into rivers and waterways, which could lead to fines of up to three times company profits.
“Companies need to own responsibility for their activities,” Mr Black said. “They should not wait for regulators to tell them to take action. They need to understand what the impacts are on rivers and then they need to be taking the appropriate steps to sort that out.”