British water companies will have to slash customer bills by £67m next year as a penalty for missing performance targets.
Thames Water, the supplier for London and the Thames Valley area was slapped with the largest repayment order and will lose out on a whopping £53.2m. Southern Water will repay £46m while South West Water will forego £15.4m.
“We are extremely disappointed with our performance and sorry for the impact this has had on customers and the environment,” a spokesperson for Thames Water told City A.M.
“While we’re heading in the right direction, we have a long way to go,” the spokesperson added referencing the company’s failure to meet 23 of 49 performance targets set by the regulator.
Disruption to supply, sewer blockages and poor maintenance of the network were among the reasons cited for the multi million pound repayment order.
The penalty system was devised as a way to incentivise private water suppliers to put money back into businesses instead of simply dishing out dividend payments. With only one water supplier per region in the UK companies do not need to bank on a strong performance to retain customers and an average of £2bn per year has been handed out to shareholders since the sector was privatised according to the Guardian.
“Ofwat is committed to ensuring water companies provide the very best service for customers,” the regulator said in a statement.
“We set them challenging targets in the interests of customers and the environment and these payments are a key way of ensuring that companies are incentivised to go above and beyond for customers, and that customers receive money back if they do not,” they continued.
Conversely, suppliers that exceeded expectations will be able to raise bills for customers under the system. Severn Trent Water was given the go ahead to recover £25m from customers while West Wessex Water will recoup £20.5m.