Investigation into whether Thames Water is contravening obligations in its Licence and the Wholesale Retail Code

Case summary (updated 6 December 2021)

Ofwat has been investigating whether certain of the data about customers that Thames Water made available to retailers at the time of the opening of the business retail market in April 2017 was accurate. We have also considered whether Thames Water had and has in place appropriate management resources and systems of planning and internal control to ensure that it is able to carry out its regulated activities.

The issues considered by this investigation had originally formed part of our Competition Act 1998 (“CA98”) investigation into Thames Water, but we no longer consider that the CA98 is the most appropriate tool to investigate and address these issues. We therefore opened this investigation under the Water Industry Act 1991 on 24 November 2020.

During our investigation, Thames Water offered undertakings to refund customers that it had overcharged, remedy the harm it had caused to water retailers and address our outstanding compliance concerns. In December 2021 we decided to close our investigation.

Summary of Ofwat’s findings

Our investigation found that Thames Water breached a number of its regulatory obligations:

  • Condition R2 (as was) of its Licence, by failing to ensure that the data that it collected and uploaded into the business retail market systems (CMOS) ahead of market opening was sufficiently accurate to enable the effective functioning of the business retail market;
  • certain requirements of the Market Terms of the Wholesale Retail Code, by failing to maintain accurate data and correct known data errors within CMOS; and
  • Condition F (as was) and now Condition P of its Licence, by failing to ensure that it has in place adequate management resources and systems of planning and internal control to enable it to carry out its regulated activities.

As a consequence of these breaches, some retailers and their business customers were incorrectly charged for their water and sewerage services.

These breaches were largely due to Thames Water’s failure to ensure it has in place appropriate data management and assurance processes and the necessary oversight to ensure that it is meeting its regulatory obligations.

To address the problems identified in our investigation, Thames Water offered a package of undertakings that will:

  • correct the errors and refund retailers and their customers for amounts overcharged;
  • compensate retailers for the harm they have suffered as a result of the data errors;
  • improve the way in which it investigates complaints and remedies problems identified through these;
  • improve the way in which it manages both data and large projects that might involve the transfer of data; and
  • improve its performance in relation to key industry data metrics.

On 19 August 2021, we published a notice of our proposal to accept these undertakings and impose a penalty on Thames Water of £1. We considered that the undertakings, when fully implemented, would address our outstanding concerns and achieved a better outcome than imposing a more significant penalty on Thames Water. Having considered the responses received, we have now published a notice confirming that we have imposed a £1 penalty on Thames Water. We have also published the undertakings that Thames Water has provided to us under section 19 of the Water Industry Act 1991.

Key publications

Notice of Ofwat’s decision to impose a financial penalty on Thames Water Utilities Limited (6 December 2021)

Notice of Ofwat’s proposal to impose a penalty on Thames Water Utilities Limited (19 August 2021)

Announcements

PN 37/21: Thames Water will pay over £11 million to business customers and water retailers after data errors

PN 25/21: Thames Water to pay over £11 million after business customers were incorrectly charged

Relevant powers

Sections 18-22A, 66DA and 117F of the Water Industry Act 1991

Date opened

24 November 2020

Date closed

6 December 2021

Enquiries

If you have a query about this case, please email: [email protected]

Media enquiries should be directed to the Ofwat Press Office: 0121 644 7642 / 7821 / 7616 / email: [email protected]