Water companies given £114m performance fine – with Thames Water amongst the worst of the lot
Water companies in England and Wales will have to return £114m to customers next year after missing performance targets, industry watchdog Ofwat has confirmed.
The regulator also revealed debt-laden supplier Thames Water has been ‘lagging’ in its bid to clean up pollution incidents, plug leakages and improve customer service.
The UK’s largest water supplier, home to over 15m customers, was slammed by Ofwat in its annual Water Company Performance Report – which categorises company performance as ‘leading’, ‘average’ or ‘lagging’.
No company managed to achieve a ‘leading ranking,’ with ten in the ‘average’ category and seven labelled as ‘lagging.’
Alongside Thames Water, laggards include Anglian Water, Bristol Water, Dŵr Cymru, South East Water, Southern Water and Yorkshire Water.
Water companies have been ordered to pay out £114m to bill payers after failing to meet key targets on reducing pollution, leakage and supply interruptions while customer satisfaction continues to fall.
The total industry amount of £114m is a net figure, driven down by some companies being rewarded – such as Severn Trent Water taking £88m and United Utilities taking £25m for improved performance.
This means the total owed on a gross level is much higher than £114m, with some suppliers offering tens of millions each.
Thames Water was the worst affected as Ofwat hit the company with a penalty of more than £100m for the latest financial year.
This was followed by Southern Water which must pay out £43m to its 4.6m customers, and Dwr Cymru which has to offer a £24.1m rebate to customers.
Rounding off the top five are Anglian Water and Yorkshire Water with £22.4m and £19.8m pay-outs respectively.
Ofwat has warned “progress has been too slow,” with fewer than half of companies achieving their performance target last year on reducing pollution incidents, or meeting their performance commitment on leakage.
This comes with most companies failing to invest allowed funding for delivering service enhancements over the past three years.
David Black, Ofwat chief executive, recognised the £114m rebate was good news for billpayers, but that it was also “very disappointing,” as he wanted the sector “do better.”
“It is not going to be easy for companies to regain public trust, but they have to start with better service for customers and the environment. We will continue to use all our powers to ensure the sector delivers better value,” he said.
Ofwat is currently investigating all 11 water and wastewater companies, with live enforcement cases for six companies for potential failures on sewage discharges into the environment.
There are also two live enforcement cases into Dŵr Cymru and South West Water in relation to the accuracy of reporting of leakage and per capita consumption performance.
Environment Secretary Thérèse Coffey considered the latest reports from Ofwat to be “disappointing.”
She has committed to scrutinising the plans of every lagging water company – and plans to meet the chief executive of every company in person.
“Our water and sewerage systems are highly complex and under increasing pressure – but that is no excuse. The public has made it clear that a clean and plentiful water supply is a priority. Government and regulators will be closely securitising upcoming business plans to ensure they deliver the best possible deal for customers, the environment and our future water needs,” she said.
A Thames Water spokesperson said the company was “sorry” it had failed to deliver, but blamed its underperformance on the summer drought and December freeze last year.
The company met 55 per cent of its annual performance commitments last year – and has been struggling under a £14bn debt pile and boardroom exodus.
It recently secured a further £750m in equity funding from shareholders – but needs a further £2.5bn by the end of the decade to improve operational performance and boost financial resilience.
The spokesperson said: “Our turnaround is already delivering performance improvements. Our complaints fell by 28 per cent, the second consecutive significant year-on-year reduction and we have seen improvements in several key performance commitments including a reduction in sewage discharges, internal sewer flooding, and sewer blockages.
“We’re making progress and we’ll continue to engage and work with Ofwat as we implement our plan. We’re determined to do better for our customers and the environment.”
Industry body Water UK told City PM that “companies recognise there is still much more to do to meet the regulator’s ever-tightening targets.”
A spokesperson saidL “Ensuring the security of our water supply in the future while protecting the environment will take significant investment. That’s why water companies in England and Wales are proposing record levels of investment over the rest of this decade, with detailed plans set to be published next week.”