Water companies across England are exploiting regulatory loopholes to avoid compensating customers left without running water for extended periods, according to David Black, CEO of Ofwat, the water industry regulator.
This year alone, tens of thousands of homes have been affected by water supply disruptions caused by ageing infrastructure. In May, a burst mains pipe left 32,500 properties in Hastings and St Leonards-on-Sea without running water for up to five days. Earlier in January, similar issues plagued households in Reading.
David Black addressed the Parliament’s Environment, Food, and Rural Affairs Committee, urging the government to revise compensation rules. Currently, water companies can evade payments by claiming the disruptions stem from “extreme events.” Black explained:
“The standards as currently written allow exemptions for extreme events. This creates a concern that companies use these exemptions to shirk their responsibilities. We believe the rules should be revised to ensure compensation is automatically provided whenever customers experience supply disruptions, regardless of the cause.”
The rules are set by the Department for Environment, Food and Rural Affairs (Defra), limiting Ofwat’s ability to enforce stricter accountability. Black highlighted that only three out of 17 water companies currently meet Ofwat’s targets for maintaining a reliable water supply.
Bonuses for Polluting Water Companies Under Scrutiny
During the same session, Ofwat officials clarified the impact of Labour’s proposed water bill on executive bonuses. Steve Reed, the Shadow Environment Secretary, recently stated that the bill aims to ban bonuses for CEOs of companies failing to meet environmental and customer service standards. However, Ofwat representatives noted that these environmental standards are yet to be defined by the regulator.
For example, last year, Severn Trent CEO Liv Garfield received a £584,000 bonus despite the company being fined £2 million for sewage dumping. The firm even received high environmental rankings from the Environment Agency (EA) despite the incident.
Helen Campbell, Ofwat’s Senior Director for Sector Performance, elaborated: ”Ofwat does not decide how companies remunerate their executives. However, we expect companies to justify bonuses against performance and compliance. Under new measures, companies will need to clearly explain how bonuses are justified, especially if criminal convictions or severe failings are involved.”
Meanwhile, a Water UK spokesperson defended water companies, stating: ”Water companies frequently pay compensation beyond government requirements. These issues arise because our infrastructure struggles to handle climate change pressures. Ofwat must approve the urgent investments necessary to improve resilience against extreme weather.”
