Misreporting leakage and per capita consumption data has cost Welsh Water millions of pounds, including a £39.4 million customer redress package.

Every Welsh Water customer has received £10 rebate after an internal review of its leakage and per capita consumption (i.e. the amount of water used per customer) reporting concluded that elements of its calculations for these key measures for the years 2020-2022 did not comply with regulatory requirements.

Restated figures show that leakage is higher than previously reported whilst per capita consumption is lower. The two measures are inherently linked.

The issue relating to the misreporting of this data was initially identified by Welsh Water’s annual assurance process and brought to Ofwat’s attention in 2022. Ofwat then launched its own enforcement investigation into the company misreporting its leakage and PCC performance commitments.

The company’s investigation identified failures in its governance and management oversight processes.

Welsh Water leakage has been running at a much higher level than was previously recognised. The company has allocated an additional £54 million to tackling leakage over the next two years to bring the level down as quickly as possible. In total Welsh Water will have spent £284 million on this between 2020 and the end of this AMP in 2025.

Total leakage for 2021/22 was 240.3 ml/d compared to 157.4 ml/d previously reported. This is equivalent to 8.6 m3 per km of main per day and compares with the latest available industry data (from companies’ annual performance reports for 2021/22) which ranges between 4.5 m3/km/day (Anglian) and 18.7 m3/km/d (Thames Water).

Restating per capita consumption data to reflect the change results in a reduction from 174.7 litres/day to 154.8 litres/day. Latest available comparative data (from companies’ annual performance reports for 2021/22) shows that per capita consumption by company in England and Wales ranged between 131.5 litres/day (Yorkshire) and 160.3 litres/day (Portsmouth Water).

The water company said the key conclusions of Ofwat’s report of its own investigation align with Welsh Water’s own investigation that was shared with the regulator in May 2023.

In March 2023, Welsh Water proposed to the regulator a customer redress package of £30 million which included a £10 rebate for customers which was made during 2023. In addition, it has proposed £59 million of expenditure to improve leakage and per capita consumption performance.

Ofwat has accepted these proposals and issued a nominal penalty of £1.

Pete Perry, Chief Executive Officer at Welsh Water said:

“We are very sorry and disappointed that this has happened. We’re investing an additional £54m over the next 2 years to identify and reduce leakage as quickly as possible and we have shared the findings of our investigations with our regulator. Whilst our robust assurance process ultimately identified the issue, there were failures in our governance and management oversight processes that allowed this in the first place. We have made the necessary changes to how we manage leakage reporting and closed the gaps in our reporting and governance processes.”

This week the regulator published its report setting out Ofwat's final decision to impose a nominal penalty on Welsh Water in light of section 19 undertakings provided by the company which includes customer redress valued at £39.4 million.

Click here to download Ofwat’s final report in full  - Ofwat's final decision to impose a nominal penalty on Dŵr Cymru / Welsh Water