Most water companies will be hit by financial penalties because of missed targets, Ofwat has announced today (3 October, 2022).
Overall, for those 11 companies, almost £150m is planned to be taken off customers’ bills in the next financial year because of missed targets on areas such as water supply interruptions, pollution incidents and internal sewer flooding.
Not all water companies have significantly missed their targets. Better performers such as Severn Trent Water have exceeded their targets in areas like biodiversity and are able to recover more money from customers, whereas poorer performing companies such as 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 2021/22 and will have to reduce customer bills accordingly. These decisions will impact customer bills in 2023-24.
These yearly targets, called performance commitments, are a combination of shared targets across the sector and bespoke individual targets on a wide range of issues. They were set in 2019 at the last price review. These are in place up until 2025, when the next price review, PR24, will come into place. The automatic payments and financial penalties announced today are based on whether companies have hit their targets and are known as outcome delivery incentives.
David Black, Ofwat CEO, 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.”
|Draft decision on payments (£m)|
|Severn Trent Water||62.9|
|South East Water||-3.2|
|South Staffs Water||3.0|
|South West Water||-13.3|