The Business Committee chair has stated that if the government must take over Thames Water, taxpayers will be exposed to its debts and operating expenses.
The largest water company in the UK, which provides services to a quarter of the country's residents, is attempting to secure additional funding as it struggles to pay its debts.
In a worst-case scenario, the government declared on Wednesday that it was prepared to take action if the company failed.
Whatever happens, water supplies will function normally.
Labour MP Darren Jones, the head of the Business and Trade Committee, said on BBC Breakfast that taxpayers would be exposed to the debt and operating expenses of a very large company if the government was forced to take over the management of Thames Water.
The issues at energy companies in recent years, he claimed, demonstrated that: "We have to bear the cost of operating these failed businesses, which is why it's so upsetting for taxpayers to see that regulators and ministers have failed to spot this problem before it all blew up. ".
On Wednesday, the government claimed that Thames Water was the subject of "a lot of work going on behind the scenes" and that it had a process ready to go "if necessary".
The situation, according to Business Secretary Kemi Badenoch, is "very concerning," and "we need to ensure Thames Water as an entity survives," she added.
A number of sewage leaks and discharges have led to harsh criticism of Thames Water's performance. The company leaks more water from its pipes than any other water company in the UK, up to 250 Olympic-size swimming pools worth every day.
The water regulatory agency Ofwat has been updated on Thames Water's efforts to raise the necessary funds, and the company has stated that it still has "strong" cash and borrowing reserves available for use.
However, it is believed that the company is having trouble finding the funds needed to pay off its sizable debt load, which is estimated to be worth £14 billion. The rate of inflation, which has increased dramatically over the past year, is correlated with interest payments on more than half of its debt.
In a special administration regime (SAR), if the company is unable to secure additional funding, it may be temporarily taken over by the government until a new buyer is found. The most recent instance of this was with energy provider Bulb after it encountered financial difficulties.
After only two years in the position, Thames Water's chief executive Sarah Bentley resigned on Tuesday. It happened a few weeks after she was asked to decline her bonus due to the way the business handled sewage spills.
