Thames Water will have to return £51 million to its customers and Southern Water almost £30 million after missing key performance targets.

Other companies incurring multi-million pound penalties include Anglian Water ( £8.5 million), South West Water (£13.3 million) and Yorkshire Water (£15.2 million) 

The outcome delivery incentives (ODIs) are the financial or reputational consequences for companies of outperformance or underperformance against their performance commitments.

Performance against the majority of performance commitments is reviewed annually so the financial consequences happen close in time to company performance and customer experience. The payments will affect the amount of revenue companies can recover from customers through their 2023-24 bills.

Ofwat has confirmed the financial penalties and payments for all water companies, with the majority having to return money to customers because of missed targets.

The worst performing companies, Thames Water and Southern Water, will have to return the money to customers because of missed targets on water treatment works compliance, pollution incidents and internal sewer flooding across 2021-22.

"Too many water companies are failing to deliver for their customers"

David Black, Ofwat Chief Executive, said:

"Too many water companies are failing to deliver for their customers. The poorest performers, Thames Water and Southern Water, are consistently falling beneath our expectations and those of their customers. They need to take immediate action to improve their performance and rebuild trust with the people they serve. We will continue to hold companies to account for their performance and we will make sure that they raise their game."

This follows on from the regulator's announcement of draft decisions in October, the consultation for which closed on 21 October 2022.

Commenting on per capita consumption (PCC) the water sector regulator said it was disappointed that companies have provided little insight into the drivers of changes in household demand in 2021-22 and the steps they are taking to reduce it.

The absence of this evidence, combined with the service failures customers experienced during 2022 driven by prolonged hot and dry weather, reinforce the need for companies to have the strongest possible incentives, Ofwat said. Companies that don't meet their 2024-25 performance commitment levels should expect to incur financial penalties.

Ofwat has also highlighted a number of changes for specific companies from the draft decisions.

Northumbrian Water's payment has been amended because of the severe impact from Storm Arwen, given the terms of its performance commitments, alongside clarification on how their greenhouse gases performance commitment operated and how its C-MeX score was calculated.

Wessex Water and Portsmouth Water have asked to defer some of their outperformance payments, so that the increase in 2023-24 bills for customers is less than it otherwise would be given the current financial pressures that they are facing, while the amount of money Severn Trent are deferring has been amended. This has resulted in Wessex Water moving from a net outperformance payment to net underperformance payment, but this is because of its deferral rather than missed targets.

CCW: "no amount of financial penalties inflicted on the poor performing water companies can undo the harm"

Mike Keil, Senior Director of Policy, Research and Campaigns at the Consumer Council for Water (CCW), said:

“No amount of financial penalties inflicted on the poor performing water companies can undo the harm service failures like sewer flooding and pollution will have caused to the environment and people’s confidence in their water company.”

“The financial penalties will mean some customers won’t see their bills rise quite as much from next April, but we want to see all companies taking additional steps to support customers at the sharp end of the cost of living crisis. Companies that have gained large financial rewards should also explain to their customers what benefits they have received in return for the money that will be added to their bills. It’s vital companies are open and transparent about these rewards at a time when many customers are struggling financially.”