Ofwat finds company’s board did not have ‘sufficient oversight and control’ over fixing leaks

This article is more than 2 years old

This article is more than 2 years old

Thames Water, Britain’s biggest water company, is to pay back £65m to customers as part of a £120m package of penalties after being castigated by the regulator for its failure to tackle leaks.



Ofwat, the watchdog for an industry that is battling calls for renationalisation, found the Thames Water board did not have “sufficient oversight and control” of its leakage performance.

Water bosses' £58m pay over last five years a 'national scandal' Read more

The £65m payment to customers comes on top of £55m in automatic penalties incurred by the company for failing to fulfil a promise it made to customers to cut leaks.



Following Ofwat’s investigation, Thames has agreed to bring forward the payment of these automatic penalties, meaning £120m will be paid to customers in the form of a rebate of about £15 over the next two years. The money will come from the firm’s shareholders, most of whom are pension funds.



Thames Water, which has paid no corporation tax for a decade because its payments are deferred while it makes major investments in infrastructure, reported an operating profit of £638m last year.

It paid out £100m in dividends to shareholders of its parent company last year, but has since put a freeze on payouts to investors. It is due to publish fresh annual figures later this month.

Chief executive Steve Robertson apologised to customers and vowed to put things right, promising that all customers will benefit not only from the rebate but also from further price reductions between 2020-25.



Robertson added: “We met our leakage targets for a decade but our recent performance has not been good enough. We let our customers down and for that we’re sorry. We have taken more control of how we manage the network and are investing significantly more in people and resources to tackle leakage, get back on track and then go beyond.”

He said the company was fixing about 1,000 leaks a week and that senior managers would only be rewarded for reducing leaks when targets were hit.

The penalty comes only days after the bosses of England’s privatised water companies were criticised by the GMB union for banking £58m in pay and benefits over the last five years while customers have been faced with above-inflation rises in their water bills.

Labour has said it would take the water industry into public ownership if Jeremy Corbyn was elected prime minister, and the industry has also attracted criticism from the government.

Michael Gove, the environment secretary, has called for a crackdown on excessive pay and offshore financial arrangements used by water companies to avoid tax. On Wednesday, he launched a further attack on “crony capitalists” who had “rigged the system”.

Ofwat’s investigation found that Thames breached two of its legal obligations through poor leakage management.

It concluded that Thames’ board and management did not pay enough attention to reducing leaks and that the company underestimated the significance of its underperformance when assuring Ofwat it was meeting its statutory obligations.

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Ofwat’s chief executive, Rachel Fletcher, said: “Thames Water failed its customers in tackling leakage and the measures we’ve announced today illustrate the scale of the company’s shortcomings and how seriously we take them.

“Customers don’t want to see their water company letting them down like this, but we hope the rebate they will now receive goes some way towards compensating them for their water company’s failure to live up to its commitments to cut leakage.”

Ofwat has set all water companies a target of bringing down leakage by at least another 15% up to 2025 and expects further reductions beyond this date.

Thames has said it wants to reduce leaks by 50% over the longer term, compared with 2016-17 levels.

The company was hit with a record environmental fine of £20.3m last year after huge leaks of untreated sewage into the Thames and its tributaries and on to land, including the popular Thames path. The prolonged leaks led to serious impacts on residents, farmers, and wildlife, killing birds and fish.



