Frank Field asks Ofwat if it can influence companies' dividends and pay
The chair of a powerful parliamentary committee has asked the water regulator whether it can influence dividends, executive pay and pension scheme funding at UK water companies.
Frank Field, who chairs the Work and Pensions committee, wrote to Ofwat in light of Anglian Water and United Utilities' decisions to close their final salary pension schemes to future accruals.
In a letter to Rachel Fletcher, Ofwat's chief executive, Field said the proposals should be seen in the context of the companies' "considerable profitability and their munificent attitude to shareholders". Both companies made after-tax profits of £1.6bn in the past five years, of which Anglian paid £0.8bn in dividends to shareholders and United Utilities paid out £1.2bn, he said.
As natural monopolies, there appears to be "no effective restraint on these firms' policy of distributing massive sums to shareholders while cutting the pension benefits that their employees are counting on for their retirement", Field wrote.
He asked Fletcher what Ofwat's view was about the companies closing their pension plans while paying large sums to shareholders and what the regulator could require of the companies on dividends, pay and pensions.
Field's letter adds to the pressure on water companies, which could face nationalisation if Labour wins the next election. Some analysts have said dividends are under threat because of Ofwat's stricter requirements on prices, service and sustainability.
Field asked why water companies shareholders should be spared the cost of repairing pension deficits through the closure of the schemes. Anglian's pension plans have an £86m deficit while United Utilities' has a £220m surplus, he said.