Thames Water has said its missed leakage targets stemmed from a decision in 2015 to develop an innovative delivery vehicle with its infrastructure partners to accelerate improvements which failed to deliver.

Yesterday Ofwat announced a package of payments and penalties worth £120 million in total following the conclusion of the water sector regulator’s investigation into the company’s leakage performance,

The water company said it had accepted the findings of the investigation and agreed a settlement, which will see all customers benefit from a rebate in 2019/20 bills and further reductions from 2020-25.

Thames said it is already executing a strong recovery plan to get its leakage target back on track by 2020 - a key part of the recovery plan has been the restructuring of the infrastructure partnership.

The utility has also committed to a further 15% reduction by 2025 – and to reduce leakage by 50% over the longer-term from 2016-17 levels.

Steve Robertson, Thames Water CEO, said:

“Reducing leakage is really important to us and to our customers. We met our leakage targets for a decade but our recent performance has not been good enough. We let our customers down and for that we’re sorry.

“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. Thanks to these changes already in place, our current leakage repair performance is our best ever at around 1,000 a week. Our focus is to restore customers’ trust and confidence in Thames Water.”

Thames Water has agreed to pay £65 million back to customers on top of £55 million in automatic penalties incurred for missing our commitments to reduce leakage, making a total of £120 million to be returned to customers. The money will come solely from Thames’ shareholders, a large majority of which are long-term pension funds, and be reflected in customer bills starting in 2019/20.

In addition, senior managers will only be rewarded for reducing leakage when targets are hit.

Thames has also agreed to enhanced Board governance and will appoint an independent auditor to monitor its annual assurance reports. As part of the commitment to be transparent, Thames will also publish monthly reporting of its leakage performance on its website.

The water company said it is investing record amounts in personnel and infrastructure to find and fix leakage, including using the latest technology such as acoustic loggers and monitoring sensors attached to individual pipes.

Thames added that it loses approximately 25% of all water that it treats and puts into its system - comparable to United Utilities (25%), Severn Trent (23%) and Yorkshire Water (23%).