Water companies have been ordered to return nearly £158million to customers after falling short of standards, the regulator has said.
Ofwat has said that water firms in England and Wales will have to pay a £157.6million fine after missing key targets on reducing pollution, leaks and supply interruptions while customer satisfaction continues to fall.
The penalty, which will be returned to customers via lowers bills next year, marks an increase from the £114million that firms were forced to pay back last year.
Thames Water, whom provide water and sewage services to around 16million households in England, have been slapped with a £56.8million fine alone – more than a third of the total penalty.
It comes as the UK’s largest water company seeks billions of pounds in equity to avoid being plunged into administration.
Southern Water, another utility company battling debt, has also been ordered to pay £31.9million.
As bills are due to go up overall in April, it is not clear whether homeowners will be better of or not with the rebate.
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.’
He was also challenged today on what the fact that companies have only reduced pollution incidents by 2 per cent despite committing to reduce them by 30 per cent, demonstrates about how water companies are operating.
Mr Black told BBC Radio 4’s Today programme: ‘It tells us water company performance is not good enough.
‘We see an inconsistent performance across the board in our assessment today that underlines the need to see culture change, a sharper focus on performance alongside a big increase in investment which will take place from next year.’
Ofwat is in charge of assessing the performance of the 17 largest water and wastewater companies in England each year. It monitors targets including sewer flooding, supply interruptions and leaks.
The worst performing companies will be required to collectively rebate £157.6million to customers on their bills for 2025/26.
Thames Water moved up a category from ‘lagging’ to ‘average’ as it met some performance targets on leakage and supply interruptions.
The penalties are separate to an ongoing Ofwat investigation into all 11 of England and Wales’s water firms, which ordered three companies to pay £168million 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.
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.
Ofwat said customer bills will be reduced to reflect the penalties, but that the total rebates will be calculated in December.