Ofwat proposes 240 million pound cut to water bills after poor performance
Draft determinations from the regulator would hand the largest underperformance payment to Yorkshire Water at 75 million pounds, with Thames Water next at 46 million pounds, while Severn Trent Water and Northumbrian Water are in line for the largest rewards for beating their targets.
The water regulator has proposed a net reduction of 240 million pounds in customer bills after 12 of the 16 water companies in England and Wales were judged to owe underperformance payments against the targets agreed at the 2024 price review. Ofwat published draft Outcome Delivery Incentive determinations for 2025-26 on Wednesday, proposing that the net effect of the payments would cut bills by 240 million pounds.
Outcome Delivery Incentives, known as ODIs, are financial payments attached to the performance commitments agreed with Ofwat at the price review, covering areas such as leakage and the experience of household and business customers. Companies that beat their targets earn outperformance payments, while those that miss them incur underperformance payments.
The largest proposed underperformance payments fall on Yorkshire Water, at 75 million pounds, and Thames Water, at 46 million pounds, according to the draft determinations reported by PA Media. The payments would be applied to customer bills from April 2027.
107 million pounds of the proposed reduction would be returned to customers in bills for 2027-28Ofwat draft determinations
At the other end of the table, Severn Trent Water and Northumbrian Water are in line for the largest outperformance payments, after Ofwat judged that they had beaten the targets set for them.
The Sun reported that the draft figures would mean about 27 pounds off annual bills for Yorkshire Water customers from April 2027 and about 7 pounds off for Thames Water customers, while Northumbrian Water customers would pay about 21 pounds more and Severn Trent customers about 8 pounds more. Ofwat cautioned that the actual changes are "affected by a range of factors and the effect will vary by company and customer type".
Ofwat said 107 million pounds of the proposed reduction would be returned to customers in bills for 2027-28. The draft determinations are now out for consultation, with final determinations due by 15 December 2026 and the changes taking effect in bills from 1 April 2027.
The proposals sit alongside separate plans that would allow water companies an extra 3.4 billion pounds in bill increases, on top of the average 36 percent rise already agreed over the five years to 2030, PA Media reported. Ofwat approved an initial 104 billion pounds of upgrades at the 2024 Price Review, and its full assessment of company performance for the year, the Operational Performance Report, is due later this month.
The draft figures land as the Government prepares water legislation. PA Media reported that the Environment Secretary, Dame Angela Eagle, will bring forward a strengthened Water Bill, and that the Prime Minister, Andy Burnham, told the Labour conference late last month that he would introduce laws paving the way to public ownership of failing water companies. A government spokesman said ministers "won't allow customers to be treated as a blank cheque".
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