Ofwat highlights worst penalties in 2021-22 performance report
Ofwat has confirmed water companies’ final Outcome Delivery Incentive payments for 2021-22 (see table) and highlights penalties at Thames Water which will have to return more than £50m to its customers and Southern Water which will have to hand back £30m, each after missing key performance targets.
Ofwat chief executive, David Black, said: “Too many water companies are failing to deliver for their customers. The poorest performers, Thames Water and Southern Water, are consistently falling beneath our expectations and those of their customers. They need to take immediate action to improve their performance and rebuild trust with the people they serve. We will continue to hold companies to account for their performance and we will make sure that they raise their game."
Ofwat flagged the following company-specific changes from its October draft decisions:

Northumbrian Water's payment was amended because of the severe impact from Storm Arwen, given the terms of its performance commitments, alongside clarification on how its greenhouse gases performance commitment operated and how its C-MeX score was calculated;
Wessex Water and Portsmouth Water have chosen to defer some of their outperformance payments, so that the increase in 2023-24 bills for customers is less than it otherwise would be given current financial pressures – Ofwat said: “This has resulted in Wessex Water moving from a net outperformance payment to net underperformance payment, but this is because of its deferral rather than missed targets”; and
Severn Trent has also altered the amount it will defer. This has increased its reward from the draft £63m to £101m.
Ofwat added: “On per capita consumption we are disappointed that companies have provided little insight into the drivers of changes in household demand in 2021-22 and the steps they are taking to reduce it. The absence of this evidence, combined with the service failures customers experienced during 2022 driven by prolonged hot and dry weather, reinforce the need for companies to have the strongest possible incentives. Companies that don't meet their 2024-25 performance commitment levels should expect to incur financial penalties.”
Senior director of policy, research and campaigns at CCW, Mike Keil, said: “No amount of financial penalties inflicted on the poor performing water companies can undo the harm service failures like sewer flooding and pollution will have caused to the environment and people’s confidence in their water company.
“The financial penalties will mean some customers won’t see their bills rise quite as much from next April, but we want to see all companies taking additional steps to support customers at the sharp end of the cost of living crisis. Companies that have gained large financial rewards should also explain to their customers what benefits they have received in return for the money that will be added to their bills. It’s vital companies are open and transparent about these rewards at a time when many customers are struggling financially.”
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