An investigation by the water industry regulator Ofwat found that Thames Water’s directors did not have sufficient oversight and control of the company’s leakage performance.
Thames Water loses approximately 25% of all water that it treats and puts into its system.
The company has agreed to pay £65m back to customers on top of £55m in automatic penalties incurred for missing its commitments to reduce leakage, making a total of £120m to be returned to customers. This means that each customer can expect a rebate of about £15 over the next two years. In this way, the fines will be borne by shareholders, which are mostly institutional investors, rather than by customers.
As part of the proposed settlement, Thames Water has committed to getting its leakage performance back in line with what it has previously promised it will deliver for its customers in 2019-20. It will also publish its performance each month in tackling leaks, appoint an independent monitor to certify the information in its monthly leakage reports and make additional leakage reductions of 15% by 2025.
In addition, senior managers will only be rewarded for reducing leakage when targets are hit.
Ofwat chief executive Rachel Fletcher said: “High leakage creates unnecessary strain on the environment, excess costs for customers and increased risk of water shortages. A well-run water company will have a good understanding of the condition of its pipes and will be able to reduce leakage over time. Ofwat has set all water companies a target of bringing down leakage by at least another 15% up to 2025 and expects further reductions beyond this date.
“Thames has assured us that they now have a grip on the leakage situation, but this should serve as a catalyst for the company to improve how it delivers on its wider commitments to customers.”
Thames Water said that it was now 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.
It pointed out that its leakage rates were not much worse than the other big water companies: United Utilities (25%), Severn Trent (23%) and Yorkshire Water (23%).
Thames Water chief executive Steve Robertson 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.”