On both sides of the Atlantic, water systems are under intense scrutiny—though for sharply different reasons. In Los Angeles, the Department of Water and Power (LADWP) recently received a vote of confidence from credit rating agency KBRA, which assigned a long-term AA rating with a stable outlook to its 2025 Series C Water System Revenue Bonds. Meanwhile, in England and Wales, water companies are facing historic penalties and a surge of public anger after regulators ordered them to refund more than £260 million to customers for poor performance, even as bills continue to rise.
The contrast is striking. In Los Angeles, the LADWP stands as the nation’s largest municipal utility, responsible for keeping water flowing to millions in one of America’s wealthiest and most populous urban regions. According to KBRA’s October 22, 2025, report, the agency’s confidence in LADWP’s fiscal health is rooted in its robust revenue streams and aggressive capital planning. As of October 1, 2025, LADWP had approximately $6.04 billion in outstanding Water System Revenue Bonds and revolving loans, plus additional parity indebtedness totaling $725.5 million from state agencies.
But it’s not all smooth sailing. The department’s ambitious $7.74 billion Water System Capital Plan, covering fiscal years 2026 through 2030, will require substantial borrowing—about two-thirds of the funding will come from bonds and parity obligations. The capital plan aims to address everything from water quality compliance (meeting federal Safe Drinking Water Act mandates and state requirements) to expanding the distribution system and developing new water resources. Notably, it includes about $300 million for the “Pure Water Los Angeles” initiative, a joint project with the Los Angeles Bureau of Sanitation that seeks to maximize recycling of wastewater from the Hyperion Water Reclamation Plant. The total preliminary cost for this initiative is a staggering $20 to $25 billion, to be phased in through 2058.
To finance these upgrades, LADWP has steadily raised water rates. The average rate for all customer classes in 2025 sits at $10.90 per hundred cubic feet—a figure KBRA still considers affordable given the city’s affluent customer base, though it’s above the national average. Year-over-year, water rates jumped by 23.6% in 2025, and the four-year compound annual growth rate since 2021 is 10.8%. Even so, the department projects no change in base rates for 2026, though it has nudged its base rate revenue target up by 0.58% to ensure compliance with financial covenants.
Yet, LADWP’s financial health is not immune to shocks. As of mid-October 2025, the department faces 74 lawsuits involving around 2,279 plaintiffs, including two putative class actions, all relating to the January 2025 Palisades Fire. Plaintiffs allege the department failed to maintain its water system for firefighting, designed it primarily for urban use, and did not de-energize power lines after the fire started—despite what they claim was a foreseeable risk. One class action alone asserts damages exceeding $10 billion. These wildfire-related inverse condemnation claims, along with rising insurance premiums, are expected to pressure water rates, increase leverage, and may delay capital spending.
Despite these risks, KBRA’s stable outlook for LADWP reflects its expectation that the department’s ability to adjust rates, maintain ample liquidity, and deploy other financial mitigants will allow it to weather these storms. The agency points to key strengths: an established water system serving a wealthy, mostly residential customer base, a rate structure that decouples revenue from demand, and competitive rates relative to local incomes. However, KBRA also highlights challenges, including strict liability under California’s inverse condemnation law, potential legal constraints on future rate hikes, and high leverage—currently at 66.5% for fiscal year 2024.
Across the ocean, the picture is far less rosy for England and Wales’ privatized water companies. On October 23, 2025, the economic regulator Ofwat ordered water firms to refund more than £260 million to customers for poor performance, with 40% of that already applied to 2025 bills and the remainder set for 2026. The refunds come as water bills are expected to keep rising steeply until 2030 to fund much-needed upgrades.
The regulatory crackdown follows a damning assessment by the Environment Agency (EA), which gave England’s water companies their worst ever combined environmental performance ratings in 2024. The sector saw a 60% spike in serious pollution incidents compared to the previous year, and the EA’s collective rating for nine companies plunged to 19 stars—down from 25 in 2023, and the lowest since ratings began in 2011. Thames Water, the UK’s largest water firm, received a one-star rating (the lowest possible) and was hit with a £75.2 million penalty for its performance in 2024/25. The company’s financial woes are mounting: it reported a loss of £1.65 billion for the year ending March 2025, with debt ballooning to £16.8 billion.
“We are facing a water system failure that has left our infrastructure crumbling and sewage spilling into our rivers,” acknowledged Environment Secretary Emma Reynolds. She emphasized that the government is taking “decisive action to fix it, including new powers to ban unfair bonuses, and swift financial penalties for environmental offences.”
Despite these penalties, water bills in England and Wales rose by an average of 26% in April 2025 after Ofwat approved companies’ investment plans. And the pain isn’t over: bills are projected to keep rising until at least 2030, as utilities scramble to upgrade aging infrastructure and stem the tide of pollution. Ofwat described overall performance in 2024/25 as “mixed,” acknowledging progress in some areas like internal sewer flooding, but warning that “there remain areas where companies and the sector must do more,” especially on pollution and supply interruptions.
The sector’s environmental failures have not gone unnoticed by campaigners or the public. James Wallace, chief executive of River Action UK, was unsparing: “Water companies in England and Wales are still underperforming, especially on serious pollution incidents, exposing the bankruptcy of the privatised water model. We urgently need a complete overhaul of this failed system to ensure that bill payers receive a fair service and that our rivers are properly protected from pollution.”
Even industry insiders are sounding the alarm. Mike Keil, chief executive of the Consumer Council for Water, warned: “Customers are now paying more than ever before through water bills and they will expect to see companies delivering on their promises to cut pollution and help bring rivers, lakes and wildlife habitats back to life. If the industry fails to deliver, the damage to public trust—which is already at an all-time low—may be unrecoverable.”
In response to the mounting crisis, the government plans to replace Ofwat with a single, more powerful regulator and overhaul the EA’s rating system from 2027. The new scale will range from “failing” to “excellent,” aiming to provide a more accurate picture of company performance and make it harder for firms to claim top marks without real improvement across the board.
As both Los Angeles and the UK press forward with costly upgrades and face mounting legal and environmental challenges, the stakes for water system reliability, affordability, and public trust have rarely been higher. The coming years will test whether these very different approaches—public sector ambition versus private sector accountability—can deliver clean, reliable water for all.
