PN 44/18: Ofwat confirms outcome delivery proposals for four companies

On 1 November, Ofwat announced a consultation on proposals for underperformance payments and outperformance payments for four of the seventeen water companies in England and Wales. Today the regulator has confirmed those proposals.

Ofwat will apply a net underperformance payment of £0.27m to South West Water reflecting its continued underperformance on pollution incidents despite its progress in reducing leakage. Anglian Water will receive an outperformance payment of £4.6m due to its reduction in leakage levels.

Severn Trent Water will receive a £24.9m wastewater outperformance payment, for major progress in sewer flooding and pollution with the rest deferred. It also incurs a net underperformance payment of £29.6m for water following poor performance on supply interruptions, leakage and drinking water complaints. New water company Hafren Dyfrdwy has incurred a net underperformance payment of £62K relating to the area formerly served by Severn Trent Water.

Ofwat also confirms that it will reset Severn Trent Water’s targets for sewer flooding and pollution from 1 January 2019 and reduce the rate at which outperformance payments are earned for external sewer flooding. Alongside this it will raise the limit on the maximum amount of outperformance payments Severn Trent Water can receive.

Ofwat Associate Director, Peter Jordan said:

Our outcomes delivery incentive framework ensures that companies focus their efforts on the things that matter to customers. Companies who go above and beyond can earn outperformance payments, but companies who fail to deliver will need to give money back to customers.

The full determination document is available here: https://www.ofwat.gov.uk/publication/final-determination-of-in-period-odis-for-2018/

Ofwat Press Office:

Tel: 0121 644 7642
Mob: 074 5801 6085
Email: fintan.hastings@ofwat.gsi.gov.uk

Notes to editors

  • Following Severn Trent Water’s purchase of Dee Valley Water and resulting licence changes, Severn Trent Water now serves customers based in England (including those formerly served by Dee Valley Water) while Hafren Dyfrdwy serves Welsh customers formerly with either Dee Valley Water or Severn Trent Water. Hafren Dyfrdwy adopted the commitments (and more immediate potential underperformance payments and outperformance payments) of Severn Trent Water in Wales.
  • Four water companies have chosen to receive some of their underperformance payments and outperformance payments more immediately after the performance in question and this decision relates to those payments for those companies. The others have opted to have all their underperformance and outperformance payments combined and applied in Ofwat’s 2019 price review, when Ofwat will set the service package that customers will receive and the price they will pay in the period 2020-2025.
  • Ofwat is proposing that from 2020, all companies will receive some of their outperformance and underperformance payments close to the performance in question.