PN 20/16 Ofwat publishes final determinations for outcome delivery incentives


15 December 2016

Ofwat has today published its final determinations for three water companies, based on their performance against commitments in their business plans for 2015-16.

Water companies have performance commitments, which they set in consultation with customers. If a company beats these stretching commitments, it is rewarded; if it misses them, it is penalised.

Following consultation we have made no changes to our draft determinations, published last month.

Severn Trent Water beat its commitments on category 3 pollution incidents by 32%, internal sewer flooding by 21%, external sewer flooding by 7% and leakage by 2% – equivalent to an extra reduction in leakage of 10 million litres per day. This results in a performance reward worth £18.8m.

Anglian Water has performed better than its commitment on leakage by 1.5% – equivalent to saving an extra 3 million litres of water per day. This results in a performance reward of £0.5m.

South West Water will incur a £1.7m penalty for missing targets, mostly connected with significant wastewater pollution incidents.

South West Water runs a WaterShare scheme in which it shares with customers financial benefits gained from beating its targets.  The company proposed deferring the penalty to offset rewards that will be due at the 2019 price review for beating other performance commitments. The independent WaterShare panel agreed with this.

Following consultation, we have accepted the proposal not to apply the penalty in 2017-18, but will consider the timing of the penalty next year when assessing South West Water’s performance. The penalty will be adjusted in line with inflation and interest when it is applied.

David Black, Senior Director for Water 2020 at Ofwat, said:

“It is great to see companies stepping up to the challenge to deliver more for less. These incentives are all about driving improvements in the quality of services customers get.”