Holding water companies to account: Improving how we measure and report on water company performance

As Wales’s environmental regulator, it’s our job to ensure that water companies are fulfilling their environmental obligations and minimising the impact of their operations on Wales rivers, lakes and coastal waters.

We do this through environmental permits, which set conditions about what is allowed to be discharged back into the environment.  Data from discharges and spills is monitored by our teams at Natural Resources Wales to ensure that water companies are complying with the conditions of their environmental permit.

Each year, we publish an annual Environmental Performance Assessment Report for each of the two water companies operating in Wales – Dŵr Cymru Welsh Water and Hafren Dyfrdwy. This measures the companies’ performance against seven metrics that are standardised in England and Wales, and provides a star-rating for the largest operating companies. Dŵr Cymru Welsh Water therefore receive a star rating from us, but due their small operating area, Hafren Dyfrdwy do not.

The annual performance report for 2024 is due to be published shortly. An interim pollution incident report was published in July.

From 2026, in conjunction with the Environment Agency in England, we’re making some important changes to how we report on the environmental performance of water companies. These changes are designed to make our reporting clearer, provide a better overall picture of the impact of water companies on the environment and strengthen our regulatory response.

What’s changing – and why?

One of the most notable changes will affect how pollution incidents caused by water company assets are recorded.

Since 2011, we’ve tracked the number of incidents reported by water companies as part of the annual assessment, which are categorised between level one (high or significant incident) to level four (low level).

Up until now, water companies have been able to discount discharges categorised at the lowest level, where there has been no detriment to water quality as ‘no impact claims’ .  Changes to water company guidance has removed these  ‘no impact claims’  and as a result all incidents will now be recorded, regardless of the severity or impact on the environment.

Water companies will also have to include ‘dry day’ spills within their incident data, for incidents where storm overflows have discharged outside of storm conditions. As their name suggests, storm overflows should only operate when the sewerage network becomes overwhelmed following heavy rainfall. In October 2023, we introduced tightened guidance to water companies about the conditions of when it is appropriate for storm overflows to spill.

This will give us as the regulator, and communities, better clarity on the scale of unpermitted discharges into our water environment. Incidents will continue to be categorised by their severity, allowing us to respond appropriately and target our regulatory actions in the right areas.

Other changes to be introduced include:

• Tightening of the thresholds for self-reporting of incidents.
• Introduction of a new metric for discharge permit compliance with descriptive conditions, applying to waste water treatment works and water treatment works with discharge permit conditions that set numeric quality limits for discharging and monitoring treated wastewater.
• Introduction of a new metric for storm overflow event duration monitor operation, Reports the  percentage of monitors reporting reliable storm overflow activation data with more than or equal to 90% operation during the annual reporting period.
• Change from star to numeric ratings, introduction of a 5^th rating and tightened metrics

View the methodology and full list of changes on the you.gov website.

What this means in practice

As we begin to introduce these changes, we expect the number of incidents recorded in our annual report will rise significantly, taking into account the previous discounted discharges. This may initially look alarming, but does not equate to an actual increase in incidents, it just reflects the change in reporting criteria.

To accurately track performance and improvements against this metric, we will need to establish a new baseline, therefore we the total incident metric will not count towards the overall EPA star rating until 2028.

However, the number of significant pollution incidents will continue to be measured and acted upon in line with our enforcement and sanctions policy. We have a range of enforcement tools available to us and we are currently pursuing several formal investigations, including potential prosecutions relating to incidents and issues of permit compliance.

Introducing a new Wales compliance team

We’ve seen a huge deterioration in the performance of Dŵr Cymru Welsh Water since 2020, and they must make urgent and fundamental changes to their operations to reduce their impact on the environment.

Since 2021, we have downgraded the company from a four-star (industry leading) to a two-star (requires improvement) company.

As a result, we are introducing a new compliance team whose job will be to closely monitor water company discharges, and take action to improve poor performance.

We continue to use all the enforcement tools available to us to drive improvements, but the company has been unable to reverse downward trends in their performance.

In March, we successfully prosecuted Dŵr Cymru Welsh Water for charges relating to over 800 breaches of it’s environmental permit, linked to it’s self-monitoring responsibilities. 

In May, the company were in court again and fined £150,000 for a series of recurring sewage pollution incidents on the highly protected Gwent Levels, and a separate incident on a tributary of the Afon Llwyd. 

Ambitious plans to protect Wales’s water

Over the next five years, we will be closely monitoring the water companies in their delivery of an ambitious investment programme which will benefit people and nature in Wales.

We pushed hard for this throughout the Ofwat Price Review process to obtain record levels of investment in the environment.

We will be closely monitoring the water companies in their delivery of this programme, making sure that they achieve the improvements needed to rectify the discharges that are known to cause the most harm to the environment.

As the economic regulation of the water industry is set to be devolved to Wales following Sir John Cunliffe’s review of the sector, we will work closely with the Welsh Government as they deliver the recommendations for Wales.

As an organisation, we are already exploring how the recommendations can bolster our current regulatory regime, and we look forward to the Welsh Government’s response and to working together to ensure that Wales’s water environment is safeguarded and improved for the benefit of nature and people.