Water companies have been instructed to lower customer bills by £158m next year due to their poor performance in meeting pollution and leakage targets. However, most customers will only see a decrease of less than £10. This marks the fourth consecutive year that companies are required to refund customers, raising concerns about the effectiveness of the regulator.
According to Water UK, the industry body, companies have shown improvements in various areas and are dedicated to enhancing their performance. Ofwat evaluates the performance of the 17 largest water and wastewater firms in England and Wales annually against specific targets related to sewer flooding, water leaks, and supply interruptions. For the second year in a row, no company achieved the highest rating, although four companies did show improvement from the previous year.
Companies that failed to meet the targets will collectively have to refund £157.6m to customers for the 2025-2026 billing period. Despite the substantial fine, most customers will experience only a slight reduction in their bills. Additionally, there is a proposed long-term increase of £94 per household over the next five years, which is currently being negotiated with water companies as part of their investment plans.
The review by Ofwat examined key targets such as reducing pollution incidents, which were expected to decrease by 30% between 2020 and 2025. Companies managed to achieve a 15% reduction in the last few years, but this progress was nearly offset by a significant increase in incidents last year. The industry attributed the rise in incidents to heavy rainfall and enhanced monitoring of sites.
Public discontent with the water sector, particularly regarding pollution, has been on the rise. Campaign group River Action’s CEO, James Wallace, criticized the industry for underperforming and questioned the effectiveness of Ofwat as a regulator. He emphasized the need for prioritizing the environment and penalizing pollution in the water bill.
David Henderson, CEO of Water UK, acknowledged the need for improvement in performance and emphasized the industry’s commitment to enhancing its operations. Despite shortcomings, many companies have made progress over the years, with leakage levels reaching their lowest point in history.
Ofwat estimates that approximately one-fifth of water supplied in England and Wales is lost through leaks, highlighting the urgency for the industry to address this issue. With water shortages already affecting many regions and climate change exacerbating the situation, the industry must focus on reducing leaks to ensure water sustainability.
Some companies, including Severn Trent, have been commended for their efforts in addressing water-related challenges. Severn Trent, SES Water, Northumbrian Water, and United Utilities exceeded their targets and will be allowed to increase charges to customers as part of an incentivization scheme.
Following the report’s release, the Department for Environment, Food and Rural Affairs announced that the environment secretary will be communicating performance expectations to water company Chairs and CEOs for the upcoming year. The industry faces pressure to make significant improvements to meet regulatory standards and enhance customer satisfaction.