River Action UK v Ofwat: high court dismisses storm overflow judicial review

The High Court has dismissed a judicial review brought by River Action UK against the Water Services Regulation Authority (Ofwat), challenging the conditions attached to enhancement expenditure allowances for storm overflow improvements set during Ofwat's Price Review 24 process.

Storm overflows function as safety valves within sewerage systems, discharging excess wastewater into rivers, lakes or the sea when the capacity of connected assets — such as sewage treatment works — is exceeded. The PR24 final determinations, published in December 2024, authorised overall expenditure allowances of up to £104 billion for the sixteen largest water companies covering the period April 2025 to March 2030, with approximately £12 billion directed towards storm overflow improvements.

The "don't pay twice" principle

Central to the dispute was Ofwat's stated policy that customers should not be required to pay twice — that is, enhancement allowances should fund genuinely new or improved performance, not remedial work to achieve compliance with existing environmental permit conditions, which ought to be funded through base expenditure. Ofwat accepted this policy formed part of its PR24 approach.

River Action UK advanced two grounds of challenge. The first concerned whether the conditions Ofwat attached to enhancement allowances were consistent with that policy. The Price Control Deliverables Appendix stipulated that companies must demonstrate "all funding is for enhancing the functioning of the asset beyond permit compliance", and that evidence must include hydraulic simulation modelling of the asset pre- and post-completion of any enhancement scheme.

The claimant argued this was insufficient. In its submission, genuine adherence to the "don't pay twice" policy required proof of actual operational compliance with discharge permit conditions and all relevant legal requirements before enhancement works were undertaken — not modelling alone. Given the well-documented history of water company non-compliance with storm overflow obligations, including potential breaches of the Urban Waste Water Treatment (England and Wales) Regulations 1994, the claimant contended that relying on modelling created a near-certain risk that customers would in fact pay twice.

The court's reasoning

Mr Justice Swift rejected that submission. The judge accepted evidence from Ofwat's senior director Chris Walters that permit compliance is not synonymous with a spill-free sewerage system — spills may reflect temporary equipment failures rather than any structural deficiency in an asset's capacity. More significantly, the judge found that the hydraulic modelling methodology itself addressed the claimant's concern. The process begins by collecting actual performance data, constructs an "as is" model verified against recorded storm events, and then produces a "basis of design" model that strips out temporary operational impairments. Because those impairments are assumed to be addressed through base expenditure, the basis of design model treats the asset as permit-compliant by definition. Permit compliance data is therefore rendered redundant as a separate evidential requirement.

The court applied the standard public law test: the question was not whether the court would have reached the same conclusion as Ofwat, but whether there was a sufficient logical basis for Ofwat's approach. Swift J was satisfied there was, noting additional safeguards including requirements for water companies to provide supporting evidence during the application process, conformity with Chartered Institute of Water and Environment Management standards, and independent verification.

Clawback provisions

The second ground concerned the adequacy of clawback arrangements permitting Ofwat to recover enhancement allowances where the conditions of any price control deliverable had not been met. The claimant submitted these provisions were insufficiently formulated to prevent customers paying twice. During the hearing it became apparent that the detailed rules governing clawback had yet to be finalised — a further consultation opened in September 2025 remains ongoing. The claimant elected not to pursue this ground and to await Ofwat's final decision on the arrangements before considering any further challenge.

The claim was dismissed in its entirety.

River Action UK, R (on the application of) v Water Services Regulation Authority [2026] EWHC 586 (Admin). United Utilities Water Limited and the Environment Agency were named as interested parties but did not appear. David Wolfe KC and Nicholas Ostrowski (Leigh Day) for the claimant; Ravi Mehta and Hugo Murphy (Dentons) for Ofwat.

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