Following consultation, Ofwat has today confirmed that Thames Water will pay £65 million back to its customers as part of a total package of payments and penalties worth £120 million.

This follows an Ofwat investigation into Thames’ failure to meet commitments it made to its customers to tackle leakage. As part of the investigation, Ofwat found that Thames Water’s Board did not pay enough attention to reducing leakage and underestimated its legal responsibility for oversight of its leakage operations and the responsibilities of its Board.

Ofwat said it had also found that Thames’ Board provided the regulator with assurances about being able to meet its legal obligations, but “it transpired these assurances were not based on solid information.”

Following the investigation, Thames Water has committed to getting its leakage performance back in line with what it has promised it will deliver for its customers in 2019-20 and to plan to reduce leakage by a further 15% by 2025.

It will also publish its performance each month in tackling leaks and do more to engage meaningfully with customers on leakage issues – including arranging for Board members meet customer representatives to discuss the company’s leakage performance. 

Ofwat has also asked the water company to ensure that no executive or senior management incentive bonus which is dependent on the company’s leakage performance in 2018-19 and 2019-20 is paid unless the company meets or exceeds its performance commitments.

In addition, Thames Water has pledged to provide Ofwat with more detailed and externally audited evidence when it provides assurances that it has the right resources, systems and controls in place to meet its statutory obligations.

“Failures we found were failures of leadership”

Ofwat Chief Executive, Rachel Fletcher, said:

“The action we have taken against Thames should help to deliver important improvements for customers and the environment.

“The formal undertakings from Thames Water to improve its Board’s oversight and determination to get on top of leakage are an important commitment because the failures we found were failures of leadership. Thames Water has now accepted that it needs to address this head-on and we will monitor closely how it does so.

“This case provides important lessons for all water companies about Board leadership and assurance of their statutory obligations – it is another reminder that, if companies fall short, we will step in.”