Water companies forced to cut £150m from customers’ bills

Thames Water, Southern Water and other companies will be forced to cut tens of millions of pounds from consumers’ bills after the regulator said they had missed pollution targets.

Eleven water companies will have to return about £150m to customers in the form of lower bills in the 2023-24 financial year, the water regulator for England and Wales, Ofwat, announced on Monday.

The government and water companies have faced increasing criticism in recent years for allowing the dumping of raw sewage into rivers and the sea. The practice is meant to be limited to periods of high rainfall but some companies are under investigation by the Environment Agency for “significant and widespread breaches”.

Related: Environment Agency knew sewage was being dumped into rivers years ago, leak reveals

Water companies in the UK have been privately owned and able to pay billions of pounds in dividends since 1989 despite enjoying a natural monopoly. As customers cannot switch water company if it underperforms, Ofwat instead runs the “outcome delivery incentives” system of automatic payments or penalties according to pre-agreed targets.

Thames and Southern will have to return £51m and £28m respectively after missed targets on water treatment works compliance, pollution incidents and internal sewer flooding across 2021-22, Ofwat said. Other recipients of large penalties included Northumbrian Water and Yorkshire Water, which will cut bills by £20m and £15m.

However, some companies will also be allowed to charge more because they have met targets. The biggest beneficiary will be Severn Trent Water, which can recoup an extra £63m from customer bills, while United Utilities will be able to charge an extra £24m.

The net result is that water companies will overall have to cut bills by £53m for failures during 2021-22.

David Black, the Ofwat chief executive, said: “When it comes to delivering for their customers, too many water companies are falling short, and we are requiring them to return around £150m to their customers.

“We expect companies to improve their performance every year; where they fail to do so, we will hold them to account. The poorest performers, Southern Water and Thames Water, will have to return almost £80m to their customers.

“All water companies need to earn back the trust of customers and the public and we will continue to challenge the sector to improve.”

Penalties to be paid by water companies

Affinity Water £0.8m; Anglian Water £8.5m; Dŵr Cymru £8m; Hafren Dyfrdwy £0.4m; Northumbrian Water £20.3m; SES Water £0.3m; South East Water £3.2m; South West Water £13.3m; Southern Water £28.3m Thames Water £51.0m; Yorkshire Water £15.2m

Bill increases allowed for companies that met targets

Bristol Water £0.6m; Portsmouth Water £0.8m; Severn Trent Water £62.9m; South Staffs Water £3.0m; United Utilities £24.1m; Wessex Water £4.4m