Nine water companies will not be using customers’ money to fund £6.8 million bonuses after an intervention by the industry watchdog.
The water services regulator Ofwat announced on Thursday it will directly block Thames Water, Yorkshire Water and Dwr Cymru Welsh Water from allowing customers to pay £1.5 million in bonuses.
Ofwat’s new powers allow the regulator to step in when water firms fail to demonstrate their executive bonuses are sufficiently linked to company performance.
This is the first year Ofwat’s new rules are being applied to hold the water and sewage industry to account. Last year, water company executives received £9.3 million in performance-related bonuses.
Ofwat said that out of £6.8 million or 73 percent of the overall bonus claims, £5.2 million were voluntarily withdrawn by water companies, who decided not to push the cost onto their customers.
David Black, chief executive of Ofwat, said: “In stopping customers from paying for undeserved bonuses that do not properly reflect performance, we are looking to sharpen executive mindsets and push companies to improve their performance and culture of accountability.
“While we are starting to see companies take some positive steps, they need to do more to rebuild public trust.”
Since 2020, Ofwat has imposed £430 million in performance penalties on water companies, which results in customers being charged less than they otherwise would be the following billing year.
Water Bill
The Water (Special Measures) Bill was introduced by the government in September and is currently making its way through the Parliament.The legislation provides for harsher penalties, including jail sentences for executives who fail to cooperate or obstruct Environment Agency and Drinking Water Inspectorate investigations.
Regulators will also be able to ban bonus payments to water bosses if environmental and other standards are not met.
Struggling Water Firms
Thames Water, the UK’s largest water supplier, has, alongside other water firms, been struggling to meet its financial obligations and is seeking longer-term funding to secure its finances.Ofwat’s decision on exec bonuses saw around £770,000 blocked in Thames Water CEO and CFO payments.
The figures for Yorkshire Water and Dŵr Cymru Welsh Water were around £616,000 and £163,000 respectively.
Commenting on Ofwat’s action, River Action Chief Executive James Wallace said it was “long overdue.”
“It is about time Ofwat put an end to water company chief executives enriching themselves at the expense of hard-pressed billpayers. It is long overdue to confront the corporate greed plaguing water companies—businesses that have consistently failed to safeguard our rivers, seas, and lakes,” said Wallace.
He urged the government to end the “era of pollution for profit” and introduce “robust legal sanctions.”
It also added a further seven companies to an “elevated concern” category over their financial resilience.
In August, Ofwat ordered water firms to return more than £150 million to customers over their poor performance in pollution, leaks, and customer satisfaction.
The regulator said the money will come off bills for households and businesses across 2025 and 2026.
