Thames Water reaches agreement with Ofwat on rebates to customers

Last reviewed:
  • Thames Water accepts findings of Ofwat’s leakage investigation and agrees settlement
  • All customers to benefit from rebate in 2019/20 bills and further reductions from 2020-25
  • Company on track to return to leakage target by 2020, with commitment to a further 15% reduction by 2025 – and 50% over the longer term

7 June 2018.

Thames Water today welcomed the conclusion of Ofwat’s investigation into its leakage performance, with all customers to benefit from a rebate in next year’s bill and further price reductions from 2020-25.

Proactively identifying and tackling leakage is a top priority for Thames Water and its customers, with the company:

  • Already executing a strong recovery plan to get its leakage target back on track by 2020
  • Committing to cut leakage by a further 15% between 2020-25 (the next regulatory period)
  • Putting in place even stronger foundations to reduce leakage by 50% over the longer-term (from 2016-17 levels)

Thames Water set itself an ambitious target during the 2015-20 regulatory period. The missed targets stemmed from a decision in 2015 to develop an innovative delivery vehicle with its infrastructure partners, to accelerate improvements in areas such as leakage.

However, as Ofwat’s investigation outlines, it failed to deliver and a key part of the recovery plan has been the restructuring of this infrastructure partnership.

Steve Robertson, Thames Water CEO, said: “Reducing leakage is really important to us and to our customers. We met our leakage targets for a decade but our recent performance has not been good enough. We let our customers down and for that we’re sorry. We have taken more control of how we manage the network and are investing significantly more in people and resources to tackle leakage, get back on track and then go beyond. Thanks to these changes already in place, our current leakage repair performance is our best ever at around 1,000 a week. Our focus is to restore customers’ trust and confidence in Thames Water.”

Thames Water has agreed to pay £65 million back to customers on top of £55 million in automatic penalties incurred for missing our commitments to reduce leakage, making a total of £120 million to be returned to customers. This money will come solely from Thames’ shareholders, a large majority of which are long-term pension funds, and be reflected in customer bills starting in 2019/20.

In addition, senior managers will only be rewarded for reducing leakage when targets are hit.

Thames has also agreed to enhanced Board governance and will appoint an independent auditor to monitor its annual assurance reports. As part of the commitment to be transparent, Thames publishes monthly reporting of its leakage performance on its website here.

Notes to editors:

On Thames:

  • Thames Water is Britain’s biggest water company, serving 15 million customers across London and the Thames Valley.
  • In the last 12 years, the company has invested more than £1 billion a year, on average, in improving service to customers, while its average combined bill remains one of the cheapest in England and Wales at just over £1 per day.

On leakage:

  • The vast majority of leakage (98%) is typically not visible, hidden below ground and difficult to locate. Visible leaks, such as seen in High Streets, are dealt with swiftly and account for just 2% of all water lost through leakage.
  • More than 25% of leakage happens on customer premises. Thames fixes most of those on supply pipes free of charge, if and when reported by customers, who are legally responsible.
  • Thames is investing record amounts in personnel and infrastructure to find and fix leakage, including using the latest technology such as acoustic loggers and monitoring sensors attached to individual pipes.
  • Thames loses approximately 25% of all water that it treats and puts into its system. This is comparable to United Utilities (25%), Severn Trent (23%) and Yorkshire Water (23%).

On rebates:

  • £55 million of the total represents automatic penalties for under-performing against leakage performance commitments.
  • The additional £65 million that will be returned to customers comprises £46 million to compensate customers for leakage under-performance over this regulatory period (2015-2020), approximately £12 million for leakage under-performance in 2018-19, and an ex-gratia payment of £7 million.
  • Investor call

    Following this morning’s investor call, a replay will be available for the next 7 days. Replay dial-in details are as follows:

    Participant Access Code: 321736

    Participant dial-in numbers

    United Kingdom: 020 3936 3001

    United States: 1 845 709 8569

    All other locations: + 44 20 3936 3001

For more information:

Thames Water press office:

Sunny Tucker - 07747 644 747

Stuart White - 020 3577 4364

Maitland Consultancy:

Neil Bennett – 0207 379 5151

James McFarlane – 0207 379 5151