Wales is on the cusp of a major shift in how its water industry is regulated, as the Welsh and UK governments announced plans to establish a dedicated water watchdog for the country. This move follows a landmark review that called for the scrapping of Ofwat, the current regulator overseeing water companies in both England and Wales, and replacing it with separate regulatory bodies tailored to the distinct needs of each nation.
The Independent Water Commission, led by Sir Jon Cunliffe, delivered a comprehensive 464-page report on July 21, 2025, highlighting the urgent need for reform in the water sector. Sir Jon described the situation as a modern "Great Stink moment," referencing the infamous 1858 crisis in London when untreated sewage in the Thames forced the government to overhaul the capital's sewer system. The report forecasts a 30% rise in water bills over the next five years, including a staggering £123 increase in 2025 alone—the biggest year-on-year hike since privatisation 36 years ago. These hikes are driven by factors such as climate change, population growth, stricter environmental standards, and the pressing need to replace ageing infrastructure, compounded by decades of underinvestment.
Recognising Wales' unique cultural and environmental context, the review emphasised that a single regulator serving both England and Wales was no longer fit for purpose. Sir Jon noted, "It is very difficult to have a regulator serving two masters, one in England and one in Wales." The report called for the creation of a new Welsh regulator, either as a stand-alone body or integrated within Natural Resources Wales (NRW), which already polices pollution and environmental standards. This shift aims to better reflect Welsh priorities, including the historical sensitivities surrounding water management, such as the flooding of the village of Capel Celyn in 1965 to create the Tryweryn reservoir—a deeply poignant event in Welsh history.
Welsh government climate change secretary Huw Irranca-Davies welcomed the report's recognition of Wales' distinct needs, describing the reforms as a "once in a generation opportunity to reset arrangements created before devolution." While no date has been set for implementing these changes, the Welsh Government is reviewing the findings and working closely with the UK Government to ensure cross-border cooperation on water management.
Currently, most Welsh consumers are served by Welsh Water, a not-for-profit company, with some customers served by Hafren Dyfrdwy, a private company owned by England-based Severn Trent. Welsh Water has faced significant criticism, including multi-million pound fines last year for leakage and other failings, and recently recorded the highest number of sewage incidents in a decade. Angela Jones, a long-time campaigner for the River Wye's cleanliness, described the review's outcome as "really, really disappointing," expressing frustration that the reforms do not go far enough to tackle the root problems caused by water companies. She remarked, "The big polluters out there, the water companies, they are the big problem. We have to have the government behind these water companies saying this has got to stop."
The review also recommends a National Water Strategy for Wales with clear priorities and interim targets. It suggests establishing an independent national systems planner to coordinate water management across sectors, including agriculture, which accounts for a higher proportion of land use in Wales compared to England. Enhanced environmental oversight by NRW and updated legislation aligned with Welsh priorities are key elements of the proposed reforms.
At the UK level, Environment Secretary Steve Reed has announced plans to abolish Ofwat and create a "super-regulator" to consolidate the powers of Ofwat, the Drinking Water Inspectorate, the Environment Agency, and Natural England. This new body aims to provide a streamlined, more effective regulatory framework to prevent the abuses and failures that have plagued the sector. Reed highlighted that "water regulation has been too weak, too complex and ineffective," and that having multiple overlapping regulators has failed both customers and the environment.
Reed also pledged to introduce a legally binding water ombudsman with real powers to resolve consumer disputes, replacing the current voluntary system. This ombudsman will expand the role of the Consumer Council for Water (CCW) and serve as a single point of contact for consumer complaints. CCW chief executive Mike Keil welcomed the move, calling it a "key ask" to restore consumer confidence.
The review's recommendations include a £104 billion investment plan aimed at halving sewage pollution by 2030 and improving infrastructure resilience. However, these improvements come with a cost, as households face significant bill increases amid a cost-of-living crisis. Sir Jon stressed the importance of restoring public trust, saying, "Trust that bills are fair, that regulation is effective, and that water companies will act in the public interest."
While some politicians and campaigners have welcomed the reforms, others remain sceptical. Former Welsh Conservative Senedd leader Andrew RT Davies criticised the prospect of granting more powers to NRW, calling it a "failed quango" and blaming Senedd ministers for the poor state of Welsh rivers. He pointed out that five of the top 20 most polluted rivers in England are in Wales, stating that "this happened on Senedd ministers' watch." In contrast, Sian Williams, head of operations in northwest Wales at NRW, defended the organisation, stating, "We don't see it as a failed organisation."
Liberal Democrats Welsh leader Jane Dodds acknowledged the need for a tougher regulator but expressed concerns about NRW's capacity to take on expanded responsibilities after over a decade of budget cuts. Plaid Cymru accused the Welsh Government of refusing to fully devolve water regulation powers, with party spokesperson Delyth Jewell stating, "Plaid Cymru will devolve these powers to help drive down bills; improve consumer choice and accountability in the water market, and reduce pollution and improve water quality."
Meanwhile, in England, Thames Water—the UK's largest water company with 16 million customers—is grappling with financial difficulties, carrying £20 billion in debt and facing potential special administration. The government has indicated readiness to intervene if necessary but has ruled out nationalisation, citing an estimated cost exceeding £100 billion, a figure economists have challenged as potentially lower.
Campaign groups have had mixed reactions. Mark Lloyd, chief executive of the Rivers Trust, praised the 88 recommendations as a pathway to dramatic environmental improvements. Conversely, water campaigner Feargal Sharkey condemned the government's perceived inaction on sewage pollution and called for Environment Secretary Steve Reed's resignation. The GMB union has called for renationalisation, citing privatisation as a failure overseen by Ofwat.
The road ahead includes the creation of regional water boards to involve local communities more closely in water management and the introduction of a real-time sewage map to increase transparency and accountability. The government plans to publish a white paper in autumn 2025 outlining the final decisions and timelines for implementation.
As Wales prepares to take control of its water regulation, the challenge will be balancing consumer protection, environmental stewardship, and financial sustainability. With decades of underinvestment and rising public frustration, the coming reforms represent a critical opportunity to reshape the water sector for the better. Whether these changes will restore trust and deliver cleaner rivers and fairer bills remains to be seen, but the momentum for transformation is undeniable.
