Ofwat says poor performance has ‘become the norm’

Ofwat has lambasted water companies for their “unacceptable performance” over the past year and demanded improvements “as a matter of urgency”.

The regulator has released full details of performance levels for 2021/22, which show targets missed across a number of key metrics.

Only three companies were categorised as sector leading in the yearly performance assessment: Severn Trent stayed in the top bracket for performance in 2021-22, while South Staffs and Bristol both moved up to it. Southern and Thames continued to lag and were joined by Yorkshire, Northumbrian, South West and Welsh in the lower bracket.

The remaining eight companies were classed as average, although the regulator added that no company subject to the ongoing wastewater treatment works investigation could be classed as leading, regardless of the outcome of the cases. Ofwat said it will work with lagging companies to take appropriate action to improve performance. They will be required to set out an action plan to address areas of poor performance that will be monitored by Ofwat.

“For some companies poor performance has become the norm. This cannot go on,” Ofwat chief executive David Black said. “We are requiring the worst performers, including Thames Water and Southern Water, to return around £120 million to customers.”

For 11 of the 12 performance commitments reported on, performance payments can be applied. The second full year of this asset management period (AMP7) showed the sector incurred larger total underperformance payments than the previous year 2020-21. The 12 months to March 2022 saw companies fail to achieve outcome deliver targets leading to £60 million underperformance payments, compared to £19 million the year before.

“In too many areas, water and wastewater companies are falling short when it comes to looking after customers, the environment and their own financial resilience. We are clear; these companies need to address this unacceptable performance as a matter of urgency,” Black said.

South West was the only organisation to meet its per capita consumption (PCC) target, with all others underperforming, despite reductions in usage demand remained above 2019 levels. Ofwat expressed concern that insufficient emphasis was being placed on driving down usage as 16 companies missed their targets and offered little information on work to improve.

All companies met their asset health mains repairs targets for the year, up from last year when 10 companies failed to achieve this metric. Likewise all 17 water suppliers met the unplanned outage performance commitment for a second year.

On internal sewer flooding, four companies achieved their targets and two – Welsh Water and South West – were top performers. However Hafren Dyfrdwy, Northumbrian, United Utilities and Yorkshire did not meet their commitment, despite improvements. Thames and Southern both reported a deterioration in performance. Water watchdog CCW made internal flooding a key area of its focus and is working with companies to decrease incidents and better communicate with households when flooding does occur.

United Utilities was the top performer for pollution incidents during 2021 amid a sector-wide overall reduction of 2% of category 1 – 3 incidents. Ofwat described the improvement as “disappointing” and noted significant improvements were reported by companies that did not meet their target. Welsh, Hafren Dyfrdwy, Northumbrian, Severn Trent and Wessex all met their goal. Ofwat noted South West has underperformed “over a number of years” and along with others that did not meet their goal, urgently needs to improve.

Companies that improved, attributed successes to increased monitoring and digitisation of sewer networks. New and emerging technologies in this area help predict and identify issues as they happen to prevent incidents or minimise damage caused.

“It is important that companies are doing everything they can to capture an accurate picture of their pollution incidents and use this to help drive improvements,” the report said. “We will continue to scrutinise company data and reported performance to ensure this is the case.”

The Environment Agency’s annual Environmental Performance Assessment (EPA) scores companies on the number of pollution incidents that occur. It showed dwindling performance by six companies that only gained one or two star ratings.

Emma Clancy, chief executive of CCW, said: “The cost of living crisis means households have enough to worry about without water companies adding to their concerns through poor customer service or the devastation of seeing their home flooded with sewage. Water is an essential service that should be reliable, safe and affordable for everyone but some companies are falling short of meeting their customers’ expectations.”

Earlier this week the regulator warned companies not to backload investment plans to the end of the AMP cycle and encouraged planned improvements to be made sooner than later for the benefit of customers and the environment.