Ofwat confirms bonus clampdown after receiving record response from the public

Ofwat confirmed it will press ahead with plans to claw back water company executive bonus payments that are not justified by performance, so customers do not fund them.

Its March consultation on the issue generated 25,000 responses from members of the public, the largest ever response the regulator has received.

Ofwat will adjust revenue allowances so customers do not fund bonuses where companies cannot clearly demonstrate their decisions reflect regulatory expectations. These expectations are set out in guidance. In summary, Ofwat requires remuneration committees to take full account of performance for customers and the environment, and performance overall, when deciding whether to award bonuses to senior executives.

Guidance has been published detailing exactly how the recovery mechanism will work.

Ofwat said it will report later this year on its assessment for 2022-23, and calculate adjustments, where appropriate, in relation to decisions made for the 2023-24 financial year onwards.

Chief executive, David Black, said: “Customer trust is damaged when executive bonuses are not aligned to water company performance. We are pleased that a number of companies and chief executives have already responded to our concerns with respect to last year. Going forward we will review all executive directors' bonus payments and where our expectations have not been met, we will use this tool to secure protection for customers in the future.”