Ofwat has launched a new consultation inviting comments on its proposals to update the Performance related executive pay (PRP) prohibition rule to reflect new changes in environmental reporting for “water only” companies (WOCs).
If implemented, the changes would require WOCs to prohibit PRP if they have had one or more category 1 incidents affecting water as reported by the Environment Agency (EA) in the calendar year preceding the end of the PRP payment year.
This would align with existing requirements for water and sewerage companies in relation to category 1 pollution incidents reported in the “Water and sewerage companies in England: environmental performance” report.
There are five WOCs in the water sector currently, all of which operate wholly or mainly in England and are regulated by the EA . The EA does not currently publish an annual environmental performance report nor apply the Environmental Performance Assessment (EPA) for WOCs. As such, the Rule's specific trigger on category 1 incidents currently does not apply to these companies.
The EA has recently concluded its consultation proposing to annually report on WOC environmental performance for the 2026 to 2030 period. The EA has confirmed that this annual reporting will include how many category 1 "incidents affecting water" each WOC has had in a calendar year.
As a result, Ofwat is now proposing to update the "Environment" trigger of the Rule to require WOCs to prohibit PRP if a category 1 incident affecting water is recorded in the EA's annual reporting.
The consultation has been issued under section 35C of the Water Industry Act 1991. In June 2025, Ofwat implemented the PRP prohibition Rule, using new powers inserted into the Water Industry Act 1991 by the Water (Special Measures) Act 2025 to require water companies to prohibit PRP for any director who is a member of the regulated company's board, in certain circumstances.
No other changes are proposed and the consultation is not seeking views on other changes to the PRP rule.
Subject to this consultation, Ofwat is proposing that the change should take effect for any PRP paid in relation to the 2026-27 financial year.
The regulator says it still intends to commence a review of the entire PRP rule in 2027 which will be subject to a separate consultation.
Ofwat is now seeking comments on the consultation questions – deadline to submit responses is 11:59pm on 27 February 2026. Responses should be sent via email to: This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
Click here to download the consultation document
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