Water companies receive financial penalties over missed targets

The regulator has said the penalty - received by 11 companies - will be taken off customers’ bills in the next financial year and has come because of missed targets in areas such as water supply interruptions, pollution incidents and internal sewer flooding. 

These yearly targets, called performance commitments, are a combination of shared targets across the sectors and bespoke individual targets on a wide range of issues, and were set in 2019 at the last price review. These will be in place until 2025 when the next price review, PR24, will come into place. 

The automatic payments and financial penalties are based on whether companies have hit their targets and are known as outcome delivery incentives. 

Not all companies have significantly missed their targets, some have exceeded them. This includes Severn Trent Water, which has succeeded in areas such as biodiversity and therefore is able to recover more money from customers. 

Meanwhile poorer performers like Thames Water and Southern Water face a financial hit because of missed targets on water treatment works compliance, pollution incidents and internal sewer flooding across the 2021/22 financial year. As such they will have to reduce customer bills accordingly, impacting the bills in 2023/24. 

Ofwat chief executive David Black said: “When it comes to delivering for their customers, too many water companies are falling short, and we are requiring them to return around £150m to their customers. 

“We expect companies to improve their performance every year; where they fail to do so, we will hold them to account. The poorest performers, Southern Water and Thames Water, will have to return almost £80m to their customers. 

“All water companies need to earn back the trust of customers and the public and we will continue to challenge the sector to improve.”

Responding to the news, Thames Water’s customer experience director Warren Buckley said: “Our aim is to always deliver brilliant customer service. 

“It’s one of the biggest priorities of our plan to turn around our performance and our shareholders have recently approved an additional £2bn into the business so we can improve outcomes for customers, leakage and river health.

“Last year we saw a significant reduction in total complaints to the business following improvements to our customer service as well as a 39% reduction in supply interruptions in the last two years. We know we have more work to do to improve customer experiences across our services and we’re already accelerating the customer elements of our turnaround plan to improve our position.

“We can confirm that the financial penalties incurred will be refunded to customers as part of their normal bills.  Adjustments to household bills will be announced next year.”