Ofwat has today said it could raise credit quality and transparency standards for water firms in a bid to protect customers against potential company financing risks.
The measures are designed to require companies to have robust finances and link their financial decisions to their performance.
Ofwat is concerned that some water companies have put “risky” financing arrangements in place.
The announcement comes just a few hours after its plans to increase the price cap for the non-household retail market by 0.31%.
A few days ago, the regulator published its report on the financial resilience of companies in the water sector exposing the weakness of certain firms.
Ofwat interim Chief Executive David Black said: “Water companies need to be financially resilient and transparent about their financial structures. We have concerns on both fronts that need addressing.
“They need to be financially secure enough to make the investment needed in the essential service they provide, maintain critical assets, and protect the environment. Without that, customers and the environment will lose out.
“Dividends should be linked to performance, and companies have to improve this if they want to rebuild the trust of their customers.”