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Ofwat proposes bill cuts for water firms missing performance targets

The Guardian ·

Ofwat says several water companies in England and Wales may have to return money to customers through lower bills after missing performance targets in 2025-26. The proposed penalties come as the sector faces criticism over rising bills, sewage pollution, debt and ageing infrastructure, and customers cannot switch provider when service falls short.

Yorkshire Water is due to return £75.1m and Thames Water £45.8m, with estimated average bill reductions of £27 and £7 respectively. Other providers also face penalties, while Severn Trent and Northumbrian Water could receive rewards that may raise bills by £8 and £21 on average. Overall, Ofwat expects a net £240m reduction in industry bills for the failures, including £107m in lower bills in 2027-28; final decisions are due by 15 December, with changes taking effect from 1 April 2027.

  • Ofwat proposes £107m in bill reductions in 2027-28.
  • Yorkshire Water and Thames Water face the largest penalties.
  • Some customers may pay more where providers earned rewards.

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Ofwat is the regulator that oversees water and sewerage companies in England and Wales. It sets rules for service and investment, and can adjust what customers pay when companies perform above or below agreed targets.

Unlike many other services, household customers cannot choose a different water supplier if their company falls short. Water firms also have to maintain pipes, treatment works and other infrastructure while dealing with sewage pollution and pressure on bills, so their performance can affect both household costs and the quality of local services.

Both sides, in good faith

The strongest fair case each way — we don't pick a winner.

The case for

Returning money to customers when companies miss agreed performance targets can make those targets meaningful and give households some redress when they have no choice of water supplier. It may also encourage better service and environmental performance, while rewards for companies that meet or exceed targets can recognise improvement and support investment.

The case against

Bill reductions may offer only modest, delayed relief while leaving customers exposed to poor service and allowing wider problems such as pollution and ageing infrastructure to persist. If penalties reduce the funds available for essential repairs or investment, they could make future service worse; regulators should therefore ensure the consequences fall on company owners and management rather than undermine improvements customers need.

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Originally published by The Guardian as “English and Welsh water firms could be forced to return £107m via lower bills”.

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