UK begins sweeping review of scandal-ridden water utility sector
Largest review of sector for decades
Regulator Ofwat could be scrapped - minister
Sector struggling to attract investment
Companies and regulator wrangle over bills
By Muvija M and Paul Sandle
LONDON, Oct 23 (Reuters) -Britain on Wednesday launched a major review to tackle the crisis in its water utility sector after years of under-investment and pollution scandals affecting rivers, lakes and seas, which could result in its regulator being abolished.
The independent commission, to be headed by Jon Cunliffe, former deputy governor of the Bank of England, will aim to strengthen regulation, boost investment and guide reforms to address "inherited systemic issues", the government said.
Britain's water utilities, which were recently fined tens of millions of pounds for missing environmental targets, are facing public anger for the alarming state of the country's rivers.
The biggest water company, Thames Water, is battling to avoid collapse under its debt pile, and has said it could run out of cash if it does not secure a lifeline.
"Our waterways are polluted and our water system urgently needs fixing," Environment Minister Steve Reed said.
"That is why today we have launched a Water Commission to attract the investment we need to clean up our waterways and rebuild our broken water infrastructure."
Reed did not rule out abolishing the regulator, or Ofwat, as part of a "root and branch" review of the entire sector, when asked on Sky News.
"People are very angry ... at the level of pollution in our rivers, lakes and seas last year, the highest levels ever recorded," he said.
The commission, billed as the largest review of the industry since its privatisation in 1989, will report back next year.
The Labour government, elected in July, set out new legislation last month to make utility bosses personally responsible for pollution, including imprisonment for executives when companies fail to cooperate or obstruct investigations.
Ofwat is due to set the industry's new pricing regime in the coming months. Investors have said they need a better deal than Ofwat has proposed before they commit funds.
Earlier on Tuesday, the regulator said the water companies had provided new evidence to back their demands to hike bills.
Water utilities are at loggerheads with regulators over how much they can charge customers and the returns they will be allowed to make. The companies say investors will not pay for infrastructure improvements if they cannot make a fair return.
The average annual household bill for water and sewerage services in Britain is 448 pounds ($581.37), compared with France at 490 euros ($530.57) a year, while U.S. households average $49 per month.
Finance minister Rachel Reeves has stressed the need for regulators to be more aware of the importance of investment in the sector. Ofwat Chief Executive David Black said he was "ready to back record investment".
"The challenge for water companies is to match that investment with the changes in company culture and performance that are essential to rebuilding the trust of customers and the public," he said in a separate statement.
($1 = 0.9235 euros)
($1 = 0.7706 pounds)
Reporting by Muvija M and Paul Sandle; editing by Mark Heinrich and Tomasz Janowski
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