15 December 2017
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. Today 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.”
Notes to editor:
- South West Water, Severn Trent Water and Anglian Water chose to receive some of their underperformance penalties and outperformance payments more immediately after the performance in question and this determination relates to those payments for those companies. The other water companies have opted to have all their underperformance penalties and outperformance payments combined and applied at the time of Ofwat’s next price review in 2019, when we will set the service package that customers will receive and the price they will pay in the period 2020-2025 .
- Click on the following link to find Ofwat’s original announcement (31 October) on the consultation for the above mentioned proposals: https://www.ofwat.gov.uk/pn-2217-ofwat-consults-underperformance-penalties-outperformance-payments-three-water-companies/