Yorkshire Water to hand £36m back to customers after missing performance targets
Regulator Ofwat has released its annual report into the performance of water firms
Last updated 8th Oct 2024
Yorkshire Water will have to pay a £36m penalty after missing key targets on reducing pollution, leaks and supply interruptions.
In an annual performance report on water firms, regulator Ofwat said customer bills will be slashed in 2025-6 to reflect the penalties, with the total rebates calculated in December.
Water firms across the country will be forced to hand back a total of £157.6m for missing targets.
The money will be returned to customers in the form of lower bills next year.
Not one company achieved the regulator's top category of "leading", with Yorkshire Water being labelled "average."
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. Ofwat said the figures are provisional until it completes a review process.
David Black, chief executive of Ofwat, said: "This year's performance report is stark evidence that money alone will not bring the sustained improvements that customers rightly expect.
"It is clear that companies need to change and that has to start with addressing issues of culture and leadership. Too often we hear that weather, third parties or external factors are blamed for shortcomings.
"Companies must implement actions now to improve performance, be more dynamic, agile and on the front foot of issues. And not wait until the Government or regulators tell them to act.
"As we look towards the next price control, the challenge for water companies is to match the investment with the changes in company culture and performance that are essential to deliver lasting change."
The penalties are separate to an ongoing Ofwat investigation into all 11 of England and Wales's water firms, which ordered three companies including Yorkshire Water to pay £168 million in fines in August, in the first results of the probe.
It comes against a backdrop of mounting public and political fury at the privatised water sector which is under fire over sewage spills, proposed bill rises and executive bonuses.
Years of under-investment by the privately-run firms combined with ageing water infrastructure, a growing population and more extreme weather caused by climate change have seen the quality of England's rivers, lakes and oceans plummet in recent years.
Some water utilities are also creaking under high levels of debt or face criticism over dividends to shareholders and executive bonuses.
Labour has said it wants the sector to reduce spills and has even proposed sweeping new laws which could see bosses face up to two years in jail if they obstruct regulators.
Steve Reed, Secretary of State for the Environment, Food and Rural Affairs, said: "Our waterways should be a source of national pride, but years of pollution and underinvestment have left them in a perilous state.
"The public deserves better. That's why we are placing water companies under special measures through the Water Bill, which will strengthen regulation including new powers to ban the payment of bonuses for polluting water bosses and bring criminal charges against persistent law breakers.
"We will be carrying out a full review of the water sector to shape further legislation that will fundamentally transform how our entire water system works and clean up our rivers, lakes and seas for good."
On Monday, a report from the Environment Agency found that almost a fifth of water supplies are being lost through leaks before they reach customers' taps.
James Wallace, CEO of campaign group River Action, said: "This might sound like a lot of money but frankly it is a drop in the ocean for polluting water companies that have handed billions in dividends and interest payments to investors.
"Clean and abundant water and healthy ecosystems are fundamental to human life and our economy.
"Yet, water companies continue to pollute the nation's waterways without facing the full force of the law or sufficient penalties."
Mike Keil, chief executive of the Consumer Council for Water (CCW), added: "Poor performance on pollution incidents and a failure to protect thousands of households from the misery of sewer flooding will do little to reverse the unprecedented decline in people's satisfaction and trust in water companies, which is reflected in our research.
"Customers will rightly question why some companies should be trusted with more of their money for future investment, when they are struggling to deliver on their existing commitments.
"People need to see and experience changes which convince them the industry cares as much about the environment as they do."
Gary Carter, GMB national officer, called the report "damning".
He said: "If the private sector wants to run water companies then shareholders should be investing their own money not expecting bill payers to bail them out.
"Ofwat is calling for a change in culture in the water companies, but it's a sector which is broken.
"Water companies are not going to change themselves. The Government needs to go further and faster and fundamentally reform the whole sector."
A Yorkshire Water spokesperson said:
“Last year, we made some great improvements in reducing leakage, which we know is a key area that our customers care about. We're pleased this work has been recognised and our performance rating has been improved by Ofwat.
"We also made progress versus the rest of the industry in how our customers perceived us and we are continuing with this improvement this year. We also delivered a significant increase in registering customers who may need extra help from us. We also made substantial investment in our wastewater network and continue to do so.
"Unfortunately, in other areas we did not meet some of our commitments and as a result, our customers will receive an adjustment to our bills from April next year. Despite this, we remain committed to doing right by our customers and delivering more of what they expect. We are in the process of investing almost £800m in our infrastructure across the region this year, which includes £180m to reduce storm overflow use and improve water quality in our region's rivers - another key area our customers really care about.
"Making long-term, lasting change takes time, but we are committed to doing more of what our customers expect and will publish a service commitment plan in November. We have also submitted plans to Ofwat outlining our largest ever environment investment between 2025 and 2030 and we look forward to their decision and delivering in the next five years."