Ofwat says that under-performance by the majority of water and wastewater companies in England and Wales, will mean companies have to return £114 million to customers next year.

The rebate, set out today by Ofwat following its assessment of performance against targets set for 2022/23, will come off customers' bills for next year. Water companies were set stretching targets for 2020-25 to deliver better outcomes, for both customers and the environment. Where they fall short on these, the regulator reduces the amount of money companies can collect from customers.

The total gross under-performance penalties of £236 million to be paid to customers by 12 companies is significantly higher than the net amount of £114 million. Five companies gained £122 million in Outcome Delivery Incentive payments for outperformance.

At £100.719 million, Thames Water topped the list of companies Ofwat has told to apply rebate payments to be returned to customers on their bills in 2024- 25. Other companies ordered to pay rebates for under-performance are as follows:

• Southern Water - £42. 9 million
• Dwr Cymru - £24.1million
• Anglian Water - £22.4 million
• Yorkshire Water - £19.8 million
• South West Water - £9.2 million
• Affinity Water - £8. 1 million
• South East Water - £5.2 million
• SES Water - £1.1 million
• Hafren Dyfrdwy - £0.5 million
• Nortumbrian Water - £0.1 million

Ofwat’s decision comes as it publishes its annual Water Company Performance Report, which categorises companies' performance as 'leading' 'average' or 'lagging', against a set of common metrics including pollution incidents, customer service and leakage. This year, no company has been ranked in the 'leading' category.

Ten companies are in the 'average' category and seven have been categorised as 'lagging' (Anglian Water, Dŵr Cymru, Southern Water, Thames Water, Yorkshire Water, Bristol Water and South East Water).

The report has also assessed company performance for the three years since the start of the current regulatory cycle (which covers 2020-2025). Over that time, companies have shown improvements in areas including leakage and internal sewer flooding and last year, all but one company achieved the performance level for unplanned water outages.

However, across the board, Ofwat says that progress has been too slow. In 2022/23, fewer than half of companies achieved their performance target on reducing pollution incidents and fewer than half of the companies meeting their performance commitment on leakage. This performance is matched by an overall decline in customer satisfaction during the past year.

Whilst almost half of companies achieved their leakage performance commitment levels in 2022-23, companies reported a challenging year in 2022-23, with most seeing an increase in leakage compared to 2021-22.

In addition, Ofwat also reports that most companies have not fully invested their 2020-2023 allowed funding for delivering service enhancements. They have overspent their total water and wastewater allowances, almost entirely due to an overspend on base costs. Companies reference increases in input costs (energy, chemicals, materials, labour), and increases in expenditure to address performance issues (e.g.leakage and supply interruptions).

However, over 2020-23, twelve companies underspent their water enhancement allowances and nine underspent their wastewater enhancement allowances. The underspend means companies are behind on their investment programmes.

Most companies have also failed to achieve the mains repairs performance commitment level in 2022-23, in contrast to 2021-22, when all companies met the performance commitment level.

Ofwat CEO - "not going to be easy for companies to regain public trust"

David Black, Ofwat CEO said:

"The targets we set for companies were designed to be stretching – to drive improvements for customers and the environment. However, our latest report shows they are falling short, leading to £114 million being returned to customers through bill reductions. While that may be welcome to billpayers, it is very disappointing news for all who want to see the sector do better.

"It is not going to be easy for companies to regain public trust, but they have to start with better service for customers and the environment. We will continue to use all our powers to ensure the sector delivers better value."

Ofwat is currently investigating all 11 water and wastewater companies and there are live enforcement cases for six companies for potential failures on sewage discharges into the environment. There are also two live enforcement cases into Dŵr Cymru and South West Water in relation to the accuracy of reporting of leakage and per capita consumption performance.

The stretching performance commitments agreed in the PR19 determinations included a commitment to a 30% reduction in pollution incidents, a 16% reduction to leakage and a 41% reduction to sewer flooding incidents.

CCW -  trust in water companies lowest in over a decade

Commenting in response to Ofwat’s announcement on water company under-performance, Mike Keil, Senior Director at the Consumer Council for Water (CCW), said:

“Customers are tired of not getting the service they deserve for the things they care about. It’s right and fair that people get their money back when they don’t receive the services they were promised by some water companies. People want assurance that their water bill is good value for money.”

“It’s good to see a few companies bucking the trend but others need to follow suit. With trust in water companies lower than it’s been for over a decade, it’s vital that companies not only improve their services but also support those customers who are struggling to afford their water bills.”

Click here to download Ofwat’s Water Company Performance Report 2022-23 in full

Click here to download Ofwat’s in-period outcome delivery incentives draft determinations for individual companies for 2022-23