Why is Ofwat making Welsh Water pay out £40m in charges?
Ofwat has blasted Wales’ water provider for “indefensible” mistakes and enforced a £40m payout on the firm.
The regulator began investigations into Welsh Water in May last year after an internal review at the company found “oversight failures” across its reporting on leakage data and Ofwat said the firm would have to pay £40m to benefit customers.
Data from the company shows that between 2020 and 2024, Welsh Water reported annual leakage numbers that were, on average, 44 per cent lower than actual leakage numbers.
Welsh Water will now automatically incur leakage and per capita consumption (PCC) under-performance payments of £6.3m and £2.9m respectively, for 2020-21 and 2021-22.
It will also incur £7.8m of under-performance payments for 2022-23 and on basis of its current forecasts could face payments of c.£13.9m for leakage and PCC in 2023-25.
These charges add to a £10-per-customer rebate paid to around 1.4 million people last year.
Pete Perry, Welsh Water chief executive, re-iterated the firm’s apology for the failures, and admitted that achieving the planned leakage reduction would be “challenging”.
“We are very sorry that this happened and Ofwat’s key conclusions as to what went wrong align with our own investigations that were shared with them together with our proposals for customer redress and additional investment to tackle leakage,” he said.
“Achieving the planned reduction in leakage will be challenging, but we have committed a substantial increase in expenditure in this area and strengthened the relevant operational teams to recover performance.”
David Black, Ofwat’s chief executive, said the company had “misled customers and regulators on its record of tackling leakage and saving water”.
“We need to invest tens of billions of pounds over the next 30 years to reduce pollution and ensure that our water infrastructure can grow with our population and adapt for climate change,” he said.
“Customers and investors will only agree to fund this if they trust water companies to provide accurate information about their performance.”
The hefty sum is not necessarily an indication of Ofwat enforcing higher financial penalties for operational failure, as the charges were accrued over a number of years.
However, the firm has said it is stepping up its policing of the embattled sector, including introducing new powers that could see utilities firms fined up to a tenth of their turnover for poor customer service.