The water industry regulator has been criticized for its “insignificant action” in reducing the amount that Thames Water was obligated to return to customers for its subpar performance by over 25%.
The final decisions by Ofwat regarding the amount of compensation that water companies in England and Wales should provide to their customers for failing to meet targets in reducing leakage and sewage spills have been released.
The regulatory body announced in September that Thames, the largest water company in Britain, would be required to return £101m to their customers, which was the highest amount among all companies.
The penalty for Thames Water has been lowered to £73.8m, which amounts to approximately £4.92 per customer. This decision was made by Ofwat after receiving detailed information from Thames on their tax losses for the years 2020 to 2025. Ofwat stated that not reducing the penalty would have diminished the financial incentives for water companies to improve the country’s water infrastructure.
According to Ofwat, 12 companies are required to give back approximately £193 million to their customers. However, five companies are allowed to increase their charges by £123 million, resulting in a net payout of £70 million from companies to customers.
In September, the regulating body announced that companies would give back a total of £114m. However, this amount was not final until the review was finished.
Thames plans to raise bills by £175 annually, from £436 to £611, between 2025 and 2030. Despite facing financial difficulties, including the sudden departure of its former CEO and preparations for potential bankruptcy, the company aims to use £18.7bn for improvements in services and infrastructure.
“The insignificant gesture holds no value for communities and serves as yet another demonstration of Ofwat’s pointless control over the water industry,” stated James Wallace, CEO of River Action.
It is preferred for the regulator to impose larger fines on water companies that do not fulfill their legal responsibilities to consumers. Ofwat should instruct shareholders of Thames Water to promptly invest in repairing their faulty infrastructure, which results in 600 million litres of clean drinking water being wasted daily and millions of litres of sewage being discharged into the river system.
A representative for the Henley Mermaids swimming group in Henley-on-Thames stated that in September, Ofwat declared that Thames Water must reimburse £101m to customers due to ongoing issues with leaks and discharge of sewage.
“We have recently been informed that only two-thirds of the amount will be returned. Meanwhile, Thames Water is raising bills for customers who are already struggling to cope with the high cost of living. This is yet another instance of regulators supporting the deteriorating water industry and its customers, while our rivers suffer the consequences.”
Liberal Democrat MP for Twickenham, Munira Wilson, expressed concern over the continual increase in water bills for consumers and the lack of consequences for water companies. Wilson believes that Thames Water should be held accountable for the amount determined by Ofwat and prioritize the needs of their customers.
Southern Water has postponed £21 million of its £43 million fine to the 2025-26 fiscal year, while Welsh Water (Dŵr Cymru) is paying £24 million. Customers of Anglian Water will have over £27 million deducted from their bills.
Furthermore, this decision permits certain companies to raise their bills in the upcoming fiscal year. Severn Trent has the potential to raise bills by £88 million, while United Utilities, which serves the north-west region of England, can increase bills by £25 million after successfully meeting their targets.