More than 20 opposition and backbench MPs have urged regulators to reject a proposed deal between Thames Water and its creditors, arguing the package would short-change customers, weaken environmental protections and shirk accountability.

In an open letter to Chris Walters, interim chief executive of Ofwat, and environment secretary Emma Reynolds, the MPs said they were writing on behalf of constituents across the Thames Water region to oppose a restructuring being negotiated by lenders holding roughly £13bn of the company’s roughly £20bn debt pile. The group of creditors – which include Assured Guaranty, Invesco, Elliott Management, Silver Point and Farallon Capital Management – is reported to be seeking an in-principle agreement with Ofwat and Thames Water this month.

The MPs demand that the deal be rejected and Thames Water be placed into special administration.

Under terms disclosed so far, some lenders would accept a haircut on Class A debt of up to 30% – a larger reduction than the 25% announced in October – and would receive at least 10% of the equity in a recapitalised company. The reported plan would see more than £13bn of existing value written off when the final deal is presented to participating investors.

Polling by Survation, commissioned by the MPs, suggested 54% of Thames Water customers believe Ofwat should reject the creditors’ proposal and place the company into special administration. The MPs say the deal would be a poor outcome for billpayers and the public purse at a time when households are under pressure from rising costs: Survation’s results are cited as showing 79% of customers consider recent bill increases unreasonable, and more than a third say they cannot afford them.

The letter also raises environmental concerns. The MPs warn the creditors’ proposal would permit continued breaches of environmental limits, meaning “15 more years of pollution of our rivers and seas”. They argue it would undermine the government’s previous commitment to halve sewage discharges by 2030, enabling Thames Water to “breach environmental regulations until at least 2035-40”. They say the creditor plan includes only an “ambition” to cut sewage outflows by 30% over the same period.

“There is a complete lack of transparency and accountability,” the MPs wrote, saying the alternative “accountability framework” put forward by creditors has not been published for public scrutiny. They also cite legal obligations on Ofwat under the Water Industry Act 1991 to secure a water company’s compliance with statutory duties, arguing that signing off a long period of regulatory non-compliance would conflict with that duty.

The signatories to the letter span a wide political range and include former Labour leader Jeremy Corbyn, former shadow chancellor John McDonnell, Liberal Democrat leader Ed Davey and a number of constituency MPs across Surrey, Oxfordshire, Buckinghamshire and London. The full list is below.

Thames Water has faced long-running financial and environmental difficulties. The company, which supplies water to around 15M customers, endured heavy criticism in recent years after repeated sewage discharges and operational failures coincided with a growing debt burden.

A Thames Water spokesperson said: “We remain focussed on working with London and Valley Water consortium and all stakeholders on a holistic market-led solution that is deliverable, will return Thames Water to an investment grade credit rating, and benefits customers, the environment, taxpayers and the UK economy.”

An Ofwat spokesperson said: “We continue to engage with London & Valley Water and are reviewing their plans carefully to assess whether they deliver a turnaround in the company’s operational performance and strengthen its financial resilience to the benefit of customers and the environment.”

Earlier government thinking reportedly considered a statutory intervention plan to renationalise it known as “Project Timber”, which advisers said could involve larger haircuts for some creditors – figures of around 40% have been mentioned in previous briefings. The government has moved away from this suggestion.

The timing of the creditors’ push comes as the government’s wider policy approach to water sector regulation and environmental enforcement remains under scrutiny, with campaigners and MPs pressing for stronger measures to curb sewage discharges and accelerate investment in sewage and stormwater infrastructure.

Ofwat is expected to consider the creditors’ proposals carefully in the coming weeks.

Signatories of open letter to Ofwat

Calum Miller, MP for Bicester and Woodstock

Bobby Dean, MP for Carshalton and Wallington

Sarah Green, MP for Chesham and Amersham

Bell Ribeiro-Addy, MP for Clapham and Brixton Hill

Olly Glover, MP for Didcot and Wantage

Helen Maguire, MP for Epsom and Ewell

Zöe Franklin, MP for Guildford

Diane Abbott, MP for Hackney North and Stoke Newington

Victoria Collins, MP for Harpenden and Berkhamsted

John McDonnell, MP for Hayes and Harlington

Freddie van Mierlo, MP for Henley and Thame

Jeremy Corbyn, MP for Islington North

Ed Davey, MP for Kingston and Surbiton

Joshua Reynolds, MP for Maidenhead

Lee Dillon, MP for Newbury

Layla Moran, MP for Oxford West and Abingdon

Apsana Begum, MP for Poplar and Limehouse

Roz Savage, MP for South Cotswolds

Al Pinkerton, MP for Surrey Heath

Munira Wilson, MP for Twickenham

Jack Rankin, MP for Windsor

Charlie Maynard, MP for Witney

Will Forster, MP for Woking

Clive Jones, MP for Wokingham

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