Thames Water Can't Charge Customers for Pension Shortfall

Thames Water, burdened by £15.2 billion in debt, is urgently seeking additional funding to avert a government-managed administration. The company’s recent proposal to charge customers £157 million to address a deficit in its pension scheme was rejected by the regulator Ofwat. This rejection comes amid ongoing scrutiny of Thames Water's operations, which have been marred by issues such as sewage discharges, leaking pipes, and dividend payouts, prompting concerns about its financial management. In its business plan for Ofwat’s 2024 price review, Thames Water requested £156.6 million to cover pension costs. However, Ofwat's provisional response indicated that the company failed to provide adequate justification for passing these costs onto customers. The regulator emphasized that since 2023, Thames Water has been prohibited from using customer funds to address pension deficits, placing the financial burden squarely on the company and its shareholders. The company’s annual report highlighted that a triennial review of the Thames Water Pension Scheme, which has been overdue since 2022, remains unresolved. The defined benefit scheme, valued at over £1 billion, has a deficit of £152 million, while another scheme is currently in surplus. Despite these challenges, Thames Water asserts that all required contributions to its pension schemes are up to date. Criticism has also been directed at Thames Water's former owner, a consortium led by Macquarie, for the company’s current predicament. Ofwat has stated that Thames Water's attempts to recover costs from customers do not align with the responsibilities that have been established since the 2009 price review.