Brixham bug compensation bill costing Pennon £3.5m so far

Compensation payments to customers affected by the cryptosporidium outbreak in south Devon’s Brixham area so far total around £3.5 million, South West Water’s parent company Pennon has revealed.

In its full year results for 2023/24 published this morning (21 May), Pennon said that all customers issued with a notice to boil water following the outbreak have been offered compensation of a bank payment or bill credit of £215 per household.

Around 16,000 households and businesses in the Brixham area were advised last week by South West not to use their tap water for drinking or washing without boiling and cooling it first after traces of the parasite cryptosporidium were discovered in the local supply.

Customers were initially offered £15 compensation, but this was subsequently increased by £100. The company’s annual results show that customers have been offered a further £100, increasing their pay outs to £215.

The total cost to the group of the compensation payments is around £3.5 million as a result of the incident, which occurred after the end of the financial year covered by the latest annual results.

Pennon’s total underlying revenues in 2023/24 were £907.8 million, up 10% on the previous year’s figure, with profits standing still at £16.8 million.

As well as operating Bristol and Bournemouth Water, Pennon has recently announced the acquisition of south east supplier SES.

Susan Davy, group chief executive officer of Pennon, said: “We are 100% focused on returning a safe water supply to the people and businesses in and around Brixham.

“Normal service has returned for 85% of customers, but we won’t stop until the local drinking water is returned to the quality all our customers expect and deserve. Our absolute priority continues to be the health and safety of our customers and our operational teams are working tirelessly around the clock to deliver this.”

Pennon’s annual results also show that the group’s dividend has been cut by £2.4 million to reflect a £2.15 million court fine imposed on the company in April last year.

The Environment Agency took South West to court for a string of environmental offences across Devon and Cornwall over a four year period.

What the agency described as the “largest ever” fine for environmental offences in the region was levied after South West pleaded guilty to illegal releases of sewage into protected water and leaks of chemicals which resulted in thousands of fish dying.

In line with Ofwat guidance, Pennon says it had cut the equivalent of last April’s court fine from its final annual dividend by 84p per share to £30.33. Pennon had already paid an interim dividend of £14.04 per share last month.

According to the results, 2023/24 was the fifth wettest year on record for Devon and Cornwall with rainfall levels 50% above long-term averages.

The weather has resulted in “significantly increased” wastewater flows, which Pennon says had an impact on headline performance for dealing with such pollution and the use of storm overflows.

Rainfall this year continues to be above the long-term averages, up 40%, with elevated groundwater levels resulting in the one-year impact of flows being equivalent to the previous two decades, say the annual results.

However this increased rainfall has helped the company to refill its strategic reservoirs ahead of target following 2022’s drought.

The results also show that South West has garnered around £17 million of annualised synergies as a result of its acquisition of Bristol Water and is ‘on track’ to meet the £20 million targeted by the current financial year.

And Pennon says its capital investment is up nearly two thirds, year on year, representing its “largest ever” water programme.