Ofwat blocks nine water firms from using customer cash for hefty bonuses
Nine water companies will be barred from funding hefty executive bonuses with customers’ money, the regulator Ofwat has said.
The watchdog said it would step in and use new powers to prevent customers from paying for £6.8m in payouts across the industry, 73 per cent of the total.
Three water firms, crisis-hit Thames Water, Yorkshire Water and Dŵr Cymru Welsh Water, will be “directly blocked” from allowing customers to pay for around £1.5m in bonuses.
The remaining £5.2m comes from other water companies voluntarily deciding not to push the cost onto their customers, funding the payouts through shareholders instead.
“Had this not been the case we would have acted to ensure these were not funded by customers,” 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,” David Black, the regulator’s chief executive, said in a statement.
The UK’s water firms have faced heavy backlash for excessive sewage leaks and a failure to address crumbling infrastructure across the network.
Thames Water is attempting to avert nationalisation as it grapples with huge debts, while many others have been fined by the regulator for pollution incidents.
“While we are starting to see companies take some positive steps, they need to do more to rebuild public trust,” Black said.
“Our new rules on exec pay and dividends link both to company performance. Through these new rules, our enforcement action and our incentive regime, which has imposed £430m in performance penalties since 2020, we are challenging companies to deliver improvements for both customers and the environment.”
The government is proposing to further increase Ofwat’s powers as part of the Water (Special Measures) Bill, enabling it to prohibit performance-related pay entirely in certain circumstances.
Secretary of State for Environment, Food and Rural Affairs Steve Reed said: “It is disgraceful that half of water companies have given out unjustifiable and unmerited bonuses.
“That is why this Government is introducing urgent legislation to ban the payment of unfair bonuses to polluting water bosses so payouts of this kind can never happen again.
“But there are deeper issues that need long-term solutions, which is why we have launched the largest review of the sector since privatisation.”