Ofwat confirms outcome delivery proposals for three water companies

Posted: Wednesday 10th January 2018

On 31 October, Ofwat announced a consultation on proposals for underperformance penalties and outperformance payments for three of the eighteen water companies in England and Wales. Now, the regulator has confirmed those proposals.

Ofwat will apply a net underperformance penalty to South West Water of £2.09m, which reflects underperformance on pollution incidents across the last two years. Severn Trent Water has done better than expected in reducing sewer flooding - one of the worst service failures customers can experience - which together with the company's performance in other areas, will result in net outperformance payment of £38.4m. Ofwat has agreed that the company should take only £11.4m of the payment next year. Ofwat has also approved an outperformance payment of £2.6m for Anglian Water, reflecting its reduction in leakage levels - an area of great importance to its customers.

All water companies have committed to improve their performance for 2015-20 based on customer consultation. Companies that underperform incur penalties - such as Thames Water's £8.55m penalty for failing to meet its leakage commitment - while companies that deliver above and beyond for customers, can earn outperformance payments.

Ofwat Director of Outcomes, Jon Ashley said:

"Our Outcome Delivery Incentives (ODI) framework is intended to ensure that companies are constantly focused on delivering what matters most to their customers. We have been very clear to all water companies, that as we head into our 2019 price review, they will need to be ever more ambitious and stretching in what they deliver for customers. For companies that continuously raise the bar in terms of the service they provide, there will be hard-earned payments; companies that fail to perform will face stiff penalties."

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