Thames Water will pay £120million to customers in the largest water compensation payment so far, the watchdog revealed today.
But households hoping for a windfall will be disappointed, as the record penalty will only amount to £15 each.
The Ofwat deal involves the announcement today of a fresh £65million to be paid back, on top of £55million of automatic penalties for missing a commitment to cut leaks.
Each Thames Water customer is set to get a total rebate of about £15 over the next two years
Ofwat said its investigation shows that the water company – which has been under fire for paying no UK corporation tax and polluting the environment – breached two of its legal obligations.
It said it ‘did not pay enough attention’ to reducing leaks and also ‘underestimated’ the consequences of its poor management of leakages.
‘High leakage creates unnecessary strain on the environment, excess costs for customers and increased risk of water shortages. A well-run water company will have a good understanding of the condition of its pipes and will be able to reduce leakage over time,’ said Ofwat chief executive Rachel Fletcher.
The £65million payment to customers is on top of a £55million in automatic penalties incurred by the company for missing its commitment it made to customers to cut leaks.
Ofwat said Thames Water had ‘committed’ to bring forward the payment of these automatic penalties.
As part of the settlement, Thames Water has also committed to getting its leakage performance back in line with what it has promised it will deliver for its customers in 2019-20.
It will publish monthly leakage reports and appoint an independent monitor to certify the information in these reports.
That is on top of cutting leaks by a further 15 per cent by 2025 and doing more to engage with customers on leakage issues, including at board level.
Ofwat has set all water companies a target of bringing down leakage by at least another 15 per cent by 2025 and expects further reductions beyond this date.
The penalties come as Thames Water has been under fire for years for paying vast dividends to its owners while polluting UK waterways, loading up on debt and paying no UK corporation tax.
Last year, it was fined a record £20.3million for allowing nearly 308,000 gallons of raw sewage to pour into the upper reaches of the Thames at six sites in Oxfordshire and Buckinghamshire. Thousands of fish and birds died while residents fell ill.
Thames Water was bought by a consortium led by Australian bank Macquarie in 2006 – the last year in which it paid any corporation tax in the UK.
Last year, Macquarie sold all of its holdings in the company. Currently, the largest shareholders are Canadian pensions group Omers and BT Pension Scheme.
Ofwat 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.
‘Thames has assured us that they now have a grip on the leakage situation, but this should serve as a catalyst for the company to improve how it delivers on its wider commitments to customers.’
Thames Water chief executive Steve Robertson admitted that their recent performance had not been ‘good enough’.
‘We let our customers down and for that we’re sorry,’ he added.
‘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.’