Water companies will pay out a net total of £114 million to bill-payers after failing to meet key targets on reducing pollution, leakage and supply interruptions while customer satisfaction continues to fall, Ofwat has said.

Not one company achieved the regulator’s top category of “leading” while Dwr Cymru, Southern, Thames, Anglian, Bristol, South East and Yorkshire Water fell into the lowest category of “lagging” and the remaining 10 were rated “average”.

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.

Water company repayment totals for under-performance in 2022/23
(PA Graphics)

If they fail to meet these, Ofwat restricts the amount of money they can take from customers.

Thames Water is the company which must return the most, more than £101 million, followed by Southern Water which must pay out £43 million.

Thames Water serves 15 million people with water and wastewater while Southern Water serves around 4.6 million

The net total industry amount of £114 million is offset by some companies being rewarded, such as Severn Trent Water taking £88 million and United Utilities taking £25 million.

Ofwat said these figures are provisional until it completes the review process.

Since 2020, companies have shown improvements in reducing leakage and internal sewage, with all but one company achieving the target for unplanned outages, though progress has been too slow across the board, Ofwat said.

Over the last year, fewer than half of water companies reached their target on reducing pollution or met their commitment on leakage, with an overall decline in customer satisfaction.

Companies have also not fully invested their allowance for 2020-2023 for improving services.

David Black, Ofwat CEO, said: “The targets we set for companies were designed to be stretching – to drive improvements for customers and the environment.

“However, our latest report shows they are falling short, leading to £114 million being returned to customers through bill reductions.

“While that may be welcome to bill payers, it is very disappointing news for all who want to see the sector do better.

“It is not going to be easy for companies to regain public trust, but they have to start with better service for customers and the environment.

“We will continue to use all our powers to ensure the sector delivers better value.”

Ofwat said it is investigating all 11 water and wastewater companies with live enforcement cases for six companies for potential failures on sewage discharges into the environment.

They are also investigating Dwr Cymru and South West Water in relation to the accuracy of leakage reporting and per capita consumption.

Mike Keil, senior director at the Consumer Council for Water, said: “Customers are tired of not getting the service they deserve for the things they care about.

“It’s right and fair that people get their money back when they don’t receive the services they were promised by some water companies. People want assurance that their water bill is good value for money.”

A Water UK spokesperson said: “Today’s figures show that, in many areas, there have been significant improvements since the start of the decade.

“There were fewer incidents of serious pollution and less leakage from our ageing water infrastructure. However, companies recognise there is still much more to do to meet the regulator’s ever-tightening targets.

“Ensuring the security of our water supply in the future while protecting the environment will take significant investment.

“That’s why water companies in England and Wales are proposing record levels of investment over the rest of this decade, with detailed plans set to be published next week.”

The Department for Environment, Food and Rural Affairs (Defra) said on Monday that it is providing more funding to reduce the amount of times sewage is pumped out of storm overflows, adding another £4 billion on to the £56 billion it announced last year.

It has updated its Storm Overflow Discharge Reduction Plan to include as “high priority sites” those storm overflows that eject sewage into Marine Protected Areas, shellfish waters, Sites of Special Scientific Interest and bathing waters.

Defra said this will not result in any bill rises for customers until 2025 and that stopping all pollution would cost between £120 billion and £600 billion, which would increase annual water bills by between £271 and £817 by 2049.

Environment Secretary Therese Coffey said: “Today’s Ofwat report is extremely disappointing. While I acknowledge there is good work ongoing in some companies – cleaning up waterways and investing in vital infrastructure – there is simply not enough of it.

“The fact that not a single water company is classified as leading is unacceptable.

“We have written to the CEOs of every water company in the lowest category of today’s report and my ministerial team and I will meet them in person to scrutinise their improvement plans.”

Labour shadow environment secretary Steve Reed said: “This devastating report demonstrates the complete failure of water companies to act on the sewage scandal.

“There can be no more damning metaphor for 13 years of Conservative failure than stinking, toxic sewage lapping up on our rivers, lakes, and seas.”