The proposed super sewer is a ‘rip-off’ that will cause massive bill rises for millions of Thames Water customers.
That’s the view of academic expert in water economics Professor Colin Green, who believes the controversial project is motivated by money.
Thames Water stands to make more than £100m a year in additional revenue from the £3.6bn, 14-mile long sewer, due to a ‘perverse incentive’ in the way the water industry is financed.
According to Professor Green, who is based at Middlesex University, the problem arises because water companies are allowed to borrow money cheaply on the bond markets to pay for major projects, and can then charge customers 4.5% per annum to service its borrowing and to pay dividends to its shareholders. As a result, bills could rise by up to £120 per year for life if the project goes ahead.
Professor Green says this ‘creates a strong incentive to pour concrete’ rather than explore green alternatives that don’t make money. At a recent hearing of Lord Selborne’s Thames Tunnel Commission, evidence was presented showing the Thames Tideway Strategic Study Group spent just £12,000 researching green alternatives to make the Thames cleaner - compared to more than £5m building a case for the super sewer. "The current system encourages water companies to borrow money to spend on large capital projects," said Professor Green. "There is a strong incentive to pour concrete, as for every pound Thames Water borrows to pay for large projects like sewers or reservoirs, they make a handsome return off their customers."
A consortium led by the Australian bank Macquarie bought Thames Water for £8bn in 2006 and if the super sewer goes ahead the regulatory capital value (RVC) of Thames Water will increase by at least 40 per cent, allowing the firm’s executives to make a large profit on their borrowings.
Hammersmith & Fulham (H&F) Council says Thames Water should look for cheaper alternatives. Leader Stephen Greenhalgh said: "Water industry experts are lining up to say that Thames Water’s case for the super sewer is flawed. The Thames has won awards for its cleanliness but we all agree that it could be cleaner still. The question is how this is delivered and it appears Thames Water’s true motivation for pushing through this massive concrete tunnel has more to do with financial gain than cleanliness."
A spokesman for Thames Water said: "Detailed and independently-chaired studies have identified the Thames Tunnel as the most economical way to deal with the 39 million tonnes of sewage that overflows to the Thames in a typical year.
"We do not yet know who will finance and build the tunnel, but it is by no means certain that it will be Thames Water."
"The rate of return for investors will be set independently by Ofwat," he added.
Lord Selborne’s Thames Tunnel Commission is due to make its recommendations public on Monday.
Fulham residents are battling to stop part of the tunnel being built from Carnwath Road.