Southern Water ordered to pay £31.9m penalty with Portsmouth Water also ordered to pay £1.1m
Water companies will have to pay a £157.6 million penalty after missing key targets on reducing pollution, leaks and supply interruptions while customer satisfaction continues to fall, Ofwat has said.
Southern Water - which looks after the area’s waste water - has been ordered to pay £31.9m, while Portsmouth Water - which supplies drinking water - must pay £1.1m following an annual performance report. Ofwat said customer bills will be slashed in 2025-6 to reflect the penalties, with the total rebates calculated in December.
It comes as Ofwat judges the performance of water companies in England and Wales each year against the "stretching" targets and if they fail to meet these, Ofwat restricts the amount of money they can take from customers..
Southern Water’s Chief Financial Officer, Stuart Ledger said the news comes at a time as the company begins a massive ‘turnaround’ plan which ill involved huge improvements and investment being made across the area.
Local complaints levelled against the company over the past year include the disruption caused in Portsmouth as a result of the burst sewer pipe which runs along Eastern Road as well as the discharges into the Solent which has impacted the water quality. Ofwat has dubbed its performance into its lowest category of “lagging”
Mr Ledger said: "This report is a reflection of the first year of our Turnaround Plan, which stabilised and improved our performance in nine of the twelve areas of focus. This included driving down overall pollutions, cutting customer complaints and boosting water quality, among other successes.
“There’s further work to be done, but having spent £3bn since 2020, we are preparing to invest billions more over the next five years – to upgrade our network and meet our customers' expectations.”
Portsmouth Water was rated as ‘average’ by Ofwat for its performance, with leakage problems being highlighted. However the company said this was largely as a result of severe weather problems in 2022 and that huge improvements had been made.
A spokesperson said: “The penalty and reward regime for key performance parameters is a well-established process within the water industry, designed by Ofwat. Over the last 5-year regulatory period, Portsmouth Water’s reward level has exceeded the level of penalty.
“In the operations year 2023-2024, we are pleased that Ofwat has recognised our strong performance in a number of areas. This includes customer service, supply interruptions and mains repairs, where we are industry leaders.
“We have received penalties due to our leakage and water quality performance in the last year, but are pleased to report that we have already put in place action and investment for both of these areas.
“Leakage is reported as a 3-year average in the water industry. Following our network experiencing a surge in bursts during severe weather in 2022, these are still inflating our rolling 3-year figures. We remain laser focused in recovering from this, demonstrated by our leakage reducing by 12 per cent in the last year - the largest fall in the industry.
“Our water quality penalty was due to three sample failures caused by faulty sampling equipment at our largest treatment works. The compliant results throughout the rest of our network confirmed the sample failures did not reflect any problem with the water quality supplied to customers. We have replaced all the sample pipework and pumping equipment. We have had no failures since and this year’s performance has returned to its usual high standard.
“The expectation of our customers and our Regulators is rightly very high. Both our action to make quick improvements where necessary and our industry leading performance in customer satisfaction, interruptions to supply and mains repairs speaks to how seriously we take our responsibility to supply high-quality, affordable drinking water to our customers.”
Despite water companies committing to reduce pollution incidents by 30%, there has only been a two per cent reduction across England and Wales, Ofwat has said. And companies are falling further behind on key targets for pollution and internal sewer flooding, the regulator added.
David Black, chief executive of Ofwat, said: "This year's performance report is stark evidence that money alone will not bring the sustained improvements that customers rightly expect.
"It is clear that companies need to change and that has to start with addressing issues of culture and leadership. Too often we hear that weather, third parties or external factors are blamed for shortcomings.
"Companies must implement actions now to improve performance, be more dynamic, agile and on the front foot of issues. And not wait until the Government or regulators tell them to act.
"As we look towards the next price control, the challenge for water companies is to match the investment with the changes in company culture and performance that are essential to deliver lasting change."
It comes against a backdrop of mounting public and political fury at the privatised water sector which is under fire over sewage spills, proposed bill rises and executive bonuses. Years of under-investment by the privately-run firms combined with ageing water infrastructure, a growing population and more extreme weather caused by climate change have seen the quality of England's rivers, lakes and oceans plummet in recent years.
Steve Reed, Secretary of State for the Environment, Food and Rural Affairs, said: "Our waterways should be a source of national pride, but years of pollution and underinvestment have left them in a perilous state.
"The public deserves better. That's why we are placing water companies under special measures through the Water Bill, which will strengthen regulation including new powers to ban the payment of bonuses for polluting water bosses and bring criminal charges against persistent law breakers.
"We will be carrying out a full review of the water sector to shape further legislation that will fundamentally transform how our entire water system works and clean up our rivers, lakes and seas for good."
Ofwat said the figures are provisional until it completes a review process.