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Ofwat consults on performance payouts

Water company performance reviewed

Ofwat has revealed four water company firms set for performance wins and losses.

New water company Hafren Dyfrdwy joins South West Water and Severn Trent in facing underperformance payments. 

Hafren Dyfrdwy has incurred a proposed net underperformance payment of £62,000 for the area formerly served by Severn Trent Water. South West Water could be looking at an underperformance payment of £270,000 for underperformance on pollution incidents, despite making progress on reducing leakage. 

Meanwhile, the regulator said Severn Trent had made “major progress” in reducing sewer flooding and pollution, yet it underperformed on supply interruptions, leakage and drinking water complaints. It has proposed the firm takes £24.9M of its outperformance payment for wastewater services now and defers some until 2020. As a result of the underperformance it should face a net underperformance payment of £29.6M.

Anglian Water is being considered for a net outperformance bonus equating to £4.6M thanks to reducing leakage levels by 9M.l a day.

Under Ofwat’s Outcome Delivery Incentives system, companies that deliver above and beyond for customers can earn outperformance payments from customers while companies that do not meet their commitments can incur underperformance payments, which are then paid out to customers. 

Ofwat senior director for Water 2020 David Black said the payments, which are being consulted on from today, force companies to focus on the customer.

“For companies that go truly above and beyond, setting new standards across the sector, our approach means there can be hard-earned payments; but companies that fail to live up to their commitments will have to return money,” he said. 

“This helps to push companies to focus on what matters most to customers.”

Where underperformance reflects breaches of licence conditions, Ofwat may take further enforcement action, as it did against Thames Water in June of this year.



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