Ofwat confirms payments and penalties for four companies

Ofwat has today (13 December) confirmed underperformance and outperformance payments for four of the 17 water companies in England and Wales.

The regulator will apply a net underperformance payment of £0.27 million to South West Water to reflect the water company’s “continued underperformance” on pollution incidents. However, Ofwat also noted that South West Water has made progress in reducing leakage.

Alongside South West Water, Ofwat has been consulting on proposed payments and penalties for Severn Trent, new water company Hafren Dyfrdwy and Anglian Water.

The regulator launched its consultation on 1 November and plans to apply the payments from April next year.

Anglian Water will receive an outperformance payment of £4.6 million due to it reduction in leakage levels by nine million litres a day. The company was named Utility of the Year at Utility Week’s 2018 awards.

Severn Trent Water will receive a £24.9 million wastewater outperformance payment, for major progress in sewer flooding and pollution with the rest deferred until 2020.

Overall Severn Trent expects a net outperformance payment of £72 million, part of which the company has chosen to take in subsequent years to keep customer bills low in the future.

But it also incurs a net underperformance payment of £29.6 million for water services following poor performance on supply interruptions, leakage and drinking water complaints.

Meanwhile new water company Hafren Dyfrdwy, created by Severn Trent, has incurred a net underperformance payment of £62,000 relating to the area formerly served by Severn Trent Water.

Severn Trent now serves customers based in England (including those formerly served by Dee Valley Water) while Hafren Dyfrdwy serves Welsh customers formerly with either Dee Valley or Severn Trent.

Ofwat has also confirmed that it will reset Severn Trent’s targets for sewer flooding and pollution from 1 January 2019 and reduce the rate at which outperformance payments are earned for external sewer flooding. Alongside this it will raise the limit on the maximum amount of outperformance payments Severn Trent can receive.

Peter Jordan, Ofwat associate director, said: “Our outcomes delivery incentive framework ensures that companies focus their efforts on the things that matter to customers.

“Companies who go above and beyond can earn outperformance payments, but companies who fail to deliver will need to give money back to customers.”

All water companies have committed to improve their performance for 2015-20 based on customer consultation. Under Ofwat’s outcome delivery incentives system, companies that deliver above and beyond for customers, can earn outperformance payments while companies that do not meet their commitments can incur underperformance payments.

Where underperformance reflects breaches of licence conditions, Ofwat may take further enforcement action, as it did against Thames Water in June of this year.