Thames Water to pay out £101m for missing performance targets
It's after failing to meet key targets on reducing pollution, leakage and supply interruptions
Last updated 26th Sep 2023
Water companies including Thames Water will pay out £114m to bill payers after failing to meet key targets on reducing pollution, leakage and supply interruptions.
Ofwat judges the performance of water companies in England and Wales each year against the "stretching" targets they set in 2019 for a five-year period until 2025.
If they fail to meet these, Ofwat restricts the amount of money they can take from customers.
Thames Water is the company which must return the most, more than £101 million, followed by Southern Water which must pay out £43 million.
The total industry amount of £114 million is offset by some companies being rewarded, such as Severn Trent Water taking £88 million and United Utilities taking £25 million.
Ofwat said these figures are provisional until it completes the review process.
Why has Thames Water got to pay back the money?
Thames Water is the UK’s largest water company serving 15 million people from Gloucestershire through to London and parts of Essex and Kent.
It is owned by a consortium of pension groups and sovereign wealth funds, including those ran by the states of Abu Dhabi and China, with the largest portion of shares – almost a third – owned by the Ontario Municipal Employees Retirement System.
In 2023 it reported an annual loss of £30.1 million and much of the company’s £14 billion debt pile was built up while owned by Australian investment giant Macquarie, which saw it rise from £2.4 million in 2005 to £10 billion a decade later.
Under Ofwat’s performance review, the company is expected to pay out a rebate of £100.7 million to its customers for failing to meet targets on reducing leakage, pollution incidents, supply interruptions, mains repairs and drinking water quality.
Ofwat say progress too slow
Since 2020, companies have shown improvements in reducing leakage and internal sewage, with all but one company achieving the target for unplanned outages, though progress has been too slow across the board, Ofwat said.
Over the last year, fewer than half of water companies reached their target on reducing pollution or met their commitment on leakage, with an overall decline in customer satisfaction.
Companies have also not fully invested their allowance for 2020-2023 for improving services.
David Black, Ofwat CEO, said: "The targets we set for companies were designed to be stretching - to drive improvements for customers and the environment.
"However, our latest report shows they are falling short, leading to £114 million being returned to customers through bill reductions.
"While that may be welcome to bill payers, it is very disappointing news for all who want to see 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."
Ofwat said it is investigating all 11 water and wastewater companies with live enforcement cases for six companies for potential failures on sewage discharges into the environment.
They are also investigating Dwr Cymru and South West Water in relation to the accuracy of leakage reporting and per capita consumption.
Mike Keil, senior director at the Consumer Council for Water, said: "Customers are tired of not getting the service they deserve for the things they care about.
"It's right and fair that people get their money back when they don't receive the services they were promised by some water companies. People want assurance that their water bill is good value for money."
Labour shadow environment secretary Steve Reed said: "This devastating report demonstrates the complete failure of water companies to act on the sewage scandal.
"There can be no more damning metaphor for 13 years of Conservative failure than stinking, toxic sewage lapping up on our rivers, lakes, and seas."
Water UK has been contacted for comment.