Ofwat reveals debt handling differences

Ofwat analysis of Annual Performance Report data has revealed vast differences in customer indebtedness to different water companies.

As of March 2024, well under 4% of customers were in debt to Yorkshire Water compared to 14% in debt to South Staffs (see chart). The average value owed by those in arrears ranged from £300 at Portsmouth (or for water and sewerage, just under £600 at Southern) to £1500 at Hafren Dw and £1400 at Welsh Water.

In total, 8.2% of household customers (2.5m) were in payment arrears to their water company, with the average amount owed at £822 (total owed £2bn). About a third of customers in arrears were enrolled in a repayment plan and these customers had lower average arrears levels, at £578.

Ofwat said affordability pressures will increase with bill rises in April, and that it is in the interest of all customers (because bad debt costs are distributed among all remaining bill-payers) for companies to recover as much owed revenue as possible – albeit this must be balanced sensitively with dealing with customers who struggle to pay.

Ofwat said its analysis will help the sector better manage customer debt by: 

• Enabling individual companies to investigate why they are outliers on key debt metrics and hence whether and how they can improve. 

• Informing its monitoring of companies' compliance with their licence and Ofwat’s ‘Paying Fair’ guidelines. 

• Providing a baseline to monitor companies' management of customer debt in the context of sector-level bill rises in April 2025.