Ofwat Blocks £1.5m in Customer-funded Bonuses for Water Executives

The UK water regulator, Ofwat, has exercised new powers to prevent nine water companies from using customer money to fund executive bonuses that are not sufficiently tied to company performance.

The move, described as part of a broader effort to restore public trust and accountability, has blocked a total of £1.5m in bonuses from crisis-hit companies and influenced additional voluntary decisions across the sector.

Who Is Affected?

• Blocked Bonuses: Thames Water, Yorkshire Water, and Dŵr Cymru Welsh Water were prohibited from using customer payments for bonuses, totaling £1.5m.
• Voluntary Actions: Six other companies—Anglian Water, Severn Trent, South West Water, Southern Water, United Utilities, and Wessex Water—have decided not to pass £5.2m in executive bonuses onto customers. Instead, shareholders will absorb the cost.

Water companies have faced growing criticism for poor performance, including sewage spills, water shortages, and financial mismanagement.

Ofwat’s intervention is aimed at ensuring that customer funds are not used to reward executives when service and environmental standards are not met.

Ofwat CEO David Black said:

“In stopping customers from paying for undeserved bonuses that do not properly reflect performance, we are looking to sharpen executive mindsets and push companies to improve their performance and culture of accountability.”

Water UK, the industry trade body, acknowledged that most bonuses are already paid by shareholders but argued for systemic reform. The group said:

“Almost all water company bonuses are already paid by shareholders, not customers. All companies recognise the need to do more to deliver on their plans … secure water supplies and end sewage entering our rivers.”

Water UK also highlighted financial challenges, noting that eight companies are currently operating at a loss, with returns in the sector down to 2%. It urged Ofwat to approve £108bn in planned investments to address infrastructure and environmental concerns.

Challenges in the Sector:

• Sewage Spills: Public outrage has surged over frequent sewage discharges into rivers and seas.
• Financial Pressure: Ofwat’s financial resilience report reveals that many water firms are struggling to maintain profitability.
• Public Distrust: Years of underperformance and environmental violations have eroded trust in the industry.

Ofwat’s intervention signals a stricter regulatory environment as it seeks to hold water companies accountable for their performance. By blocking undeserved bonuses, the regulator hopes to incentivize better management and cultural change across the industry.

However, companies argue that without faster regulatory approvals for major investments, their ability to improve services and address environmental concerns could be hindered.
Source: Sky news 
Image: City AM