Defra to double customer payouts when services fail – and could uprate some payments further

Defra has confirmed its plans to increase and extend payments for water customers affected by supply failures. It will bring forward secondary legislation to update the Guaranteed Standards Scheme (GSS), under The Water Industry Act 1991.

A statutory instrument will be laid in Parliament to implement the changes outlined in Defra’s August-October 2024 consultation – as a minimum. This includes at least doubling all payment values for households and businesses when companies fail to meet GSS expectations; improving existing standards; and introducing new standards to the scheme to make payments compulsory rather than voluntary – such as when boil water notices are issued or or when firms fail to conduct meter readings or installations as promised.

Defra said issues like low water pressure could see payments of up to £250, compared to just £25 currently available, and payments for internal flooding from sewers could rise to £2,000 or more, compared to £1,000 under current rules.

The statutory instrument will also include some amendments to further strengthen consumer protection measures where respondents to the consultation opposed the proposals, typically arguing for higher remedy payments for customers. Defra will undertake further work on this.

One strand will consider uprating payment values regarding: failure to restore supply, sewer flooding, drinking water quality, incorrect debt action and Priority Services Registers. Another will consider tightening the proposals for specific standards. In particular, the plan to introduce a force majeure clause to replace weather exemptions in the existing sewer flooding standard was not popular because customers perceived these exemptions “to provide companies with an easy ‘get out’ clause from making payments for service failures”. Defra said it needed to strike a balance between that perspective and what it is reasonable to expect companies to payout in “genuinely extreme circumstances”.

The GSS establishes baseline expectations for customer service in the water sector, including timely restoration of water supply after interruptions, prompt responses to written complaints, and effective management of sewer flooding risks. Payment rates when water service standards are not met have remained unchanged since 2000.