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Ofwat orders Thames Water to pay £65M back to customers

Thames Water has agreed to pay £65 million back to customers as part of a package of payments and penalties worth £120 million.

Ofwat chief executive Rachel Fletcher said the measures against Thames 'illustrate the scale of the company's shortcomings'Ofwat chief executive Rachel Fletcher said the measures against Thames 'illustrate the scale of the company's shortcomings'

This follows an Ofwat investigation that found that Thames Water’s board did not have sufficient oversight and control of the company’s leakage performance.

The £65 million payment to customers is on top of £55 million in automatic penalties incurred by the company for missing the commitment it made to customers to cut leaks.

Following Ofwat’s investigation, Thames has committed to bring forward the payment of these automatic penalties. This means that Thames’ shareholders will return a total of £120 million to customers.

As a result, each Thames customer will get a total rebate of approximately £15 over the next two years.

Ofwat’s investigation found that Thames Water breached two of its legal obligations through poor leakage management. It concluded that Thames Water’s board and management did not pay enough attention to reducing leakage and that the company underestimated the significance of its underperformance on leakage when assuring Ofwat that it was meeting its statutory obligations, one of which is to deliver an efficient and economic service.

As part of the proposed settlement, 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.

It will also publish its performance each month in tackling leaks, appoint an independent monitor to certify the information in its monthly leakage reports, make additional leakage reductions of 15 per cent by 2025 and do more to engage with customers on leakage issues – including at its board.

Thames Water has also pledged to provide Ofwat with more detailed evidence to assure that it is meeting its statutory obligations in relation to leakage and improving its management control over the delivery of core operational functions.

Ofwat chief executive Rachel Fletcher said: “Thames Water failed its customers in tackling leakage and the measures we’ve announced today illustrate the scale of the company’s shortcomings and how seriously we take them.

"High leakage creates unnecessary strain on the environment, excess costs for customers and increased risk of water shortages. A well-run water company will have a good understanding of the condition of its pipes and will be able to reduce leakage over time.

"Ofwat has set all water companies a target of bringing down leakage by at least another 15 per cent up to 2025 and expects further reductions beyond this date.

"Thames has assured us that they now have a grip on the leakage situation, but this should serve as a catalyst for the company to improve how it delivers on its wider commitments to customers.

"Customers don’t want to see their water company letting them down like this, but we hope the rebate they will now receive goes some way towards compensating them for their water company’s failure to live up to its commitments to cut leakage.”

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."

Environment Secretary Michael Gove welcomed the announcement, saying: "Thames Water completely failed in their duty of care to their customers, leaving them to suffer leaks for far too long through poor management. But actions speak louder than words, and they must deliver on their commitment to provide compensation and much-needed improvements to customers.

"This is exactly the kind of decisive action Ofwat should be taking, and shows an ongoing commitment to ensuring customers receive the service they deserve. I fully support [Ofwat chairman] Jonson Cox and his team's work to hold the water industry to account."

Author: Robin Hackett, editor, WWT
Topic: Policy & Regulation
Tags: ofwat , leaks , Thames Water , leakage

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