Tens of millions of pounds will be cut from UK households’ water bills by suppliers fined for missing key performance and environmental targets.
Industry regulator Ofwat has ordered 11 of the 17 water companies in England and Wales to return a total of £150m to customers in the next financial year.
The penalties come as the industry faces “the biggest wave of protests since privatisation more than 30 years ago due to untreated sewage pouring into rivers and coastal waterways near popular beaches”, reported the Financial Times (FT).
Why are the companies being fined?
According to Ofwat, the companies are being hit with penalties for “missed targets on areas such as water supply interruptions, pollution incidents and internal sewer flooding”.
Water companies are allowed to dump sewage in rivers, lakes and seas at times of exceptional rainfall, to help relieve pressure on the sewerage system. But some companies are under investigation by the Environment Agency for “significant and widespread breaches” of the legal permits.
Since the industry was privatised in 1989, water companies in England and Wales have paid out billions of pounds in dividends “despite enjoying a natural monopoly”, said The Guardian. Because customers cannot switch suppliers if their water company underperforms, “Ofwat instead runs the ‘outcome delivery incentives’ system of automatic payments or penalties according to pre-agreed targets”, the paper added.
Households can't change their water supplier if they perform badly, so our regulations are in place to incentivise improvements. Part of how we do this is by forcing companies to reduce bills when they perform poorly. Read more about their performance https://t.co/MKhqdPM7xj pic.twitter.com/tmhb1Qqb6m
— Ofwat (@Ofwat) October 3, 2022
With many customers now struggling to cope as a result of the cost-of-living crisis, the regulator is also urging water suppliers “to pilot new ways to help vulnerable households, including seasonal charging to help lower water bills in the winter when energy costs are higher”, said the FT.
Where will water bills go down?
Thames Water and Southern Water, which service London and the southeast of England, were the “poorest performers” and have been ordered to repay a combined total of almost £80m, Ofwat said.
The 11 companies ordered to return money to customers are:
- SES Water: £300,000
- Hafren Dyfrdwy: £400,000
- Affinity Water: £800,000
- South East Water: £3.2m
- Dŵr Cymru: £8m
- Anglian Water: £8.5m
- South West Water: £13.3m
- Yorkshire Water: £15.2m
- Northumbrian Water: £20.3m
- Southern Water: £28.3m
- Thames Water: £51m
While the fines will be returned in the form of bill cuts, “with companies allowed to increase bills in line with CPIH inflation – which hit 8.6% in the 12 months to August – these reductions may be wiped out”, warned Sky News.
Mike Keil, policy director at the Consumer Council for Water, told the FT that the penalties would “help to ensure bills do not rise as much as anticipated next April for some customers, but it won’t be enough to cushion the blow for the one in ten households that already say their water bill is unaffordable”.
Will some water bills go up?
The “outcome delivery incentives” system works both ways, so “companies exceeding their targets will be allowed to raise prices, meaning bills could go up for millions of people”, said Glasgow-based paper The Herald.
Six companies will be permitted to increase water bills:
- Bristol Water: £600,000
- Portsmouth Water: £800,000
- South Staffs Water: £3m
- Wessex Water: £4.4m
- United Utilities: £24.1m
- Severn Trent Water: £62.9m
To check which company provides your water and sewerage services, enter your postcode in the search tool at the Water UK website.