Thames Water forced to return £74 million to customers after pollution and leak failings

Thames Water has been ordered to pay out nearly £74 million to customers by the water watchdog after falling short of performance targets.

The company was among several water firms who missed key targets on reducing pollution, leakages and supply interruptions, regulatory body Ofwat found.

The fine for underperforming will be passed onto Thames Water's 15 million customers through lower bills over 2024 and 2025.

Underperforming providers are restricted by Ofwat in the amount of money they can charge bill payers, and in this instance expected to pay back customers by lowering bills.

Thames Water is the UK’s biggest water supplier and provides water services for 15 million people in London and the South East. It has come under pressure in recent years over its poor performance in tackling leaks and sewage contamination, while facing criticism for handing out big rewards to top bosses and shareholders.

The beleaguered company staved off nationalisation earlier this year after its shareholders have agreed to pump another £750 million in funding into the utility giant, but warned another £2.5 billion will be needed by 2030 as it struggles under a £14 billion debt mountain.

The regulatory body said Britain’s biggest water supplier has “significant issues to address” over its financial strength. The firm said its shareholders would inject a further £750 million of equity funding before 2025, "subject to certain conditions".

Ofwat judges the performance of water companies in England and Wales each year against the “stretching” targets they set in 2019 for a five-year period until 2025.

Thames Water apologised, saying its performance last year was "severely affected by the summer drought and December freeze/thaw event.”  

Last month, 12,000 Surrey residents were left without water for days due after Storm Ciarán created issues at the Shalford water treatment works.

The firm has come under criticism for untreated sewage spills in rivers. Around 40 million tonnes of raw, untreated sewage is currently discharged into the Thames every year.

A spokesperson for Thames Water said: “They also acknowledge that additional equity funding, indicatively of £2.5billion, will be required during the next regulatory period (2025-2030) to further improve operational performance and financial resilience.

"This is the largest equity support package ever seen in the UK water sector and underscores our shareholders’ commitment in delivering Thames Water’s turnaround and life’s essential service for the benefit of our customers, communities, and the environment.”

“Our turnaround is already delivering performance improvements. Our complaints fell by 28%, the second consecutive significant year-on-year reduction and we have seen improvements in several key performance commitments including a reduction in sewage discharges, internal sewer flooding, and sewer blockages.

"We’re making progress and we’ll continue to engage and work with Ofwat as we implement our plan. We’re determined to do better for our customers and the environment.”

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Water UK, which represents water companies, said: “Water companies are determined to provide the best possible service for their customers. It is right that where a company falls short of meeting performance targets, customers are automatically compensated through reduced bills.

 “Ultimately it is investment that will drive improvements. That’s why water companies are proposing £96 billion to ensure the future security of our water supply and to reduce overflow spills into rivers and seas as fast as possible.”