The Independent Water Commission, led by former Bank of England deputy governor Sir Jon Cunliffe, will outline recommendations to turn around the floundering sector in its final report on Monday.
The review was commissioned by the UK and Welsh governments as part of their response to systemic industry failures, which include rising bills, record sewage spills and debt-ridden company finances, although ministers have ruled out nationalising companies.
The Government will respond to the recommendations in Parliament later on Monday.
The review reportedly includes proposals to establish a new system of regulation, which is currently split between Ofwat, the Environment Agency and the Drinking Water Inspectorate.
Ministers will announce a consultation that could lead to axing Ofwat, which oversees how much water companies in England and Wales can charge for services, according to the Guardian.
Ofwat has faced intense criticism for overseeing water companies during the years that they paid shareholders and accrued large debts while ageing infrastructure crumbled and sewage spills skyrocketed.
In an interview with the Sunday Times, Environment Secretary Steve Reed suggested he was in favour of a new model where regional boards managed water in their areas, including representatives from water companies, local authorities and other organisations.
He said: “I think the catchment-based model has a lot to commend it. Because if you can manage what’s going into the water better, you can clean up the water faster.”
Asked on Friday if there were plans to scrap Ofwat as the regulator, Downing Street said the Government will wait for a final report.
A No 10 spokesman said: “We are waiting for Sir Jon Cunliffe’s final report next week, you can expect us to set out our response after that on what more we will do to turn the sector around.”
A Government spokesperson said: “We are not going to comment on speculation.” Ofwat declined to comment.
Mr Reed is also expected to announce a new Government pledge to halve sewage pollution from water companies by the end of the decade, during broadcast interviews on Sunday.
He said: “Families have watched their local rivers, coastlines and lakes suffer from record levels of pollution.
“My pledge to you: the Government will halve sewage pollution from water companies by the end of the decade.”
But in his Sunday Times interview, he acknowledged that bills were unlikely to fall from their current level, saying instead that an investment of £104 billion in the sector would “avoid the need for any big bill hikes in the future”.
It comes after the Environment Agency on Friday said the number of serious pollution incidents caused by water companies across England rose by 60% in 2024 compared with the previous year.
The figures showed companies recorded a total of 2,801 pollution incidents, up from 2,174 in 2023.
Of these, 75 were categorised as posing “serious or persistent” harm to wildlife and human health – up from 47 last year.
The Environment Agency said it is clear some companies are failing to meet the targets it has set on pollution, attributing failures to persistent underinvestment in new infrastructure, poor asset maintenance and reduced resilience because of the impacts of climate change.
Earlier on Friday, the Public Accounts Committee also released a report which called the level of pollution “woeful” and recommended an overhaul of the regulation system.
The cross-party group of MPs said the Government must act with urgency to strengthen oversight of the sector to rebuild trust and ensure its poor performance improves.
The Independent Water Commission published its interim report in June, which found the sector to be beset with “deep-rooted, systemic” failures.
While the paper outlined the commission’s direction of travel, it stopped short of providing detailed recommendations on policy, regulatory reform and corporate governance, which are now expected in the final report.
The interim review pointed to the need for better regulation of water companies but it did not recommend the wholesale scrapping of Ofwat, which some have urged.
Nationalisation, which some campaigners have also called for, was excluded from its terms of reference when commissioned by the Government.
Meanwhile, the Conservatives accused Labour of copying the previous government’s policies and doing nothing to halt rises in water bills.
Shadow environment secretary Victoria Atkins said the Government should be “transparent” about where the money to fix Britain’s sewers was coming from, warning that consumers may have to stump up some of the cash.
She added: “Labour’s water plans must also include credible proposals to improve the water system’s resilience to droughts, without placing an additional burden on bill payers and taxpayers.”
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