Thames Water has today agreed to pay £65 million back to customers as part of a package of payments and penalties worth £120 million in total.

This follows an Ofwat investigation which found that Thames Water’s Board did not have sufficient oversight and control of the company’s leakage performance.

The £65 million payment to customers is on top of £55 million in automatic penalties incurred by the company for missing the commitment it made to customers to cut leaks. Following Ofwat’s investigation, Thames has committed to bring forward the payment of these automatic penalties. This means that Thames Water will return a total of £120 million to customers, all of which will be borne by shareholders.

Ofwat’s investigation has resulted in these penalties being brought forward, meaning that Thames Water’s customers will now see bill reductions before 2020.

As a result, each Thames customer will get a total rebate of approximately £15 over the next two years - approximately £6.50 in 2019-20 and £8.50 in 2020-21. They will also see bill reductions of approximately £2 for each of remaining four years of period 2020-2025

Thames Water Board and management didn’t pay enough attention to reducing leakage

Ofwat’s investigation found that Thames Water breached two of its legal obligations through poor leakage management. It concluded that Thames Water’s Board and management did not pay enough attention to reducing leakage and that the company underestimated the significance of its underperformance on leakage when assuring Ofwat that it was meeting its statutory obligations, one of which is to deliver an efficient and economic service.

As part of the proposed settlement, Thames Water has committed to getting its leakage performance back in line with what it has promised it will deliver for its customers in 2019-20. It will also publish its performance each month in tackling leaks, appoint an independent monitor to certify the information in its monthly leakage reports, make additional leakage reductions of 15% by 2025 and do more to engage with customers on leakage issues – including at its Board.

Thames Water has also pledged to provide Ofwat with more detailed evidence to assure that it is meeting its statutory obligations in relation to leakage and improving its management control over the delivery of core operational functions.

Ofwat - measures indicate scale of company's shortcomings

Ofwat Chief Executive, Rachel Fletcher said:

“Thames Water failed its customers in tackling leakage and the measures we’ve announced today illustrate the scale of the company’s shortcomings and how seriously we take them.

"High leakage creates unnecessary strain on the environment, excess costs for customers and increased risk of water shortages. A well-run water company will have a good understanding of the condition of its pipes and will be able to reduce leakage over time. Ofwat has set all water companies a target of bringing down leakage by at least another 15% up to 2025 and expects further reductions beyond this date.

"Thames has assured us that they now have a grip on the leakage situation, but this should serve as a catalyst for the company to improve how it delivers on its wider commitments to customers.

"Customers don’t want to see their water company letting them down like this, but we hope the rebate they will now receive goes some way towards compensating them for their water company’s failure to live up to its commitments to cut leakage.”

CCWater - we will continue to hold Thames to account

Sir Tony Redmond, London and South East Chair for the Consumer Council for Water, said:

“We are disappointed that it has taken this intervention from Ofwat for Thames Water to finally confront its poor performance on leakage, which is an issue customers really care about.”

“We reported in December that Thames Water had lost more than twice as much water per property each day when compared to the best performing water company. That sends completely the wrong message to consumers at a time when they are being asked to play their part in using water wisely to help protect the future of our water resources. We’ll continue to hold the company to account on its promise to improve its performance.”