Londoners will be paying over £100 million less to Thames Water next year as the company was hit the hardest by a crackdown from regulators.
The capital’s troubled utility is on the hook for the lion’s share of the financial impact from Ofwat’s action against inadequate performance, which reached £114 million in total across the industry. The penalty Thames faces from forced cuts to bills is more than twice as high as other firms’.
And Thames was placed in the bottom of three performance categories – “lagging” – along with six others. Ofwat said the industry’s progress has been “too slow” toward its tougher targets. Not least, the regulator found that most companies had not “fully invested” the funding set aside for improving services between 2020 and 2023.
That came even with the water industry at the centre of a long and angry public outcry over the release of raw sewage into rivers. It came amid perceptions of decades of under-investment in infrastructure and high returns for shareholders. Not a single company in England and Wales made it into the top “leading” category. All the others were classified as “average”.
The drop in income comes at a difficult time for Thames.
It is grappling with a £14 billion debt burden after soaring interest rates cast an ominous shadow over its finances, stoking concern this year about its viability before its shareholders stumped up £750 million in more cash in July. Its biggest investor is Canadian pension fund OMERS and the UK’s Universities Superannuation Scheme
Ofwat watchdog said today that most water companies underperformed against the targets set for 2022/23, part of a wider set of measures covering 2020 to 2025. It warned that progress across the industry toward fewer leaks and sewage overflows was “too slow”, with under half of companies hitting targets.
David Black, Ofwat’s chief executive, said that while lower bills “may be welcome” the reason for the cuts was also “very disappointing news for all who want to see the sector do better,” adding:
“It is not going to be easy for companies to regain public trust, but they have to startwith better service for customers and the environment.”
Thames blamed the weather for some of the problems and pointed out that it “met 55%” of its annual performance commitments for 2022/2023, and that it was “determined to do better”.
A company spokesperson said: “Our customers expect a great service from us every time, and we’re sorry when we fail to deliver at the first opportunity,” adding:
“While it is our job to deliver our services whatever the weather, our performance last year was severely affected by the summer drought and December freeze/thaw event.”
The other firms Ofwat branded as “lagging” were Anglian Water, Dŵr Cymru, Southern Water, Yorkshire Water, Bristol Water and South East Water.
