English and Welsh water firms could be forced to return £107m via lower bills

Bills at Yorkshire Water could fall by £27 on average in 2027-2028, while those at Thames could fall by £7, according to Ofwat estimates.

Stock Photo English and Welsh water firms could be forced to return £107m via lower bills Yorkshire and Thames among providers facing penalties for missing performance targets, but bills could rise elsewhere Business live – latest updates Thames Water, Yorkshire Water and other providers could be forced to cut tens of millions of pounds from household bills after the regulator said they had missed performance targets.

Customer bills at Yorkshire Water could fall by £27 on average, while those at Thames could decrease by £7, according to estimates by Ofwat, the regulator of the privatised industry in England and Wales.

The water industry has faced growing criticism in recent years amid rising bills, scrutiny over sewage pollution, high levels of debt and underinvestment in ageing infrastructure.

As water customers cannot switch away from their provider if it underperforms, Ofwat instead has an “outcome delivery incentive” (ODI) system of automatic payments or penalties based on agreed targets.

Yorkshire and Thames will have to return £75.1m and £45.8m respectively after missing targets in 2025-26, Ofwat said.

The payments will add to the financial pressures on the companies, although Thames has been allowed to delay some of the penalties by a year.

Chart of estimated impact of penalties on average water bill in 2027-28Yorkshire is among the companies subject to enhanced monitoring by Ofwat over its financial resilience, while the government is considering whether to bring Thames Water under public control after years-long negotiations to reduce its crippling debts.

The other companies that must return money to customers include: Dŵr Cymru (or Welsh Water), at £16.7m; South West Water, at £16m; and United Utilities in north-west England, at £13.4m.

However, some companies will receive a reward payment because they met their targets – covered by higher bills.

Severn Trent, which serves the Midlands, south-west England and parts of Wales, and Northumbrian Water are in line to receive an extra £41.8m and £35.9m respectively, Ofwat said.

Northumbrian customers’ bills could rise by an average of £21, the regulator said.

Severn Trent customers could pay £8 more per year.

Overall, the industry is expected to cut its bills by a net £240m for failures during 2025-26.

Of this, £107m is expected to be returned to customers via lower bills in 2027-28.

Ofwat said at this stage the figures were still at the draft stage and not every household would receive the same change.

Bills are “affected by a range of factors and the effect will vary by company and customer type”, the regulator said.

It will make its final decision on the payments by 15 December, which will take effect on bills from 1 April 2027.

Ofwat recently announced that water companies could increase annual tariffs by an extra £3.4bn, on top of the 36% average rise agreed over five years to 2030.

Customer bills are rising to pay for long-overdue investments to fix leaking pipes and treatment works, as well as to pay for new assets such as reservoirs. skip past newsletter promotion after newsletter promotion Andy Burnham last month said the government would pave the way for public ownership of water firms and promised a 10-year path to a “very different water system in the UK”.

The comments suggested the prime minister might opt for a temporary nationalisation of debt-laden Thames Water as the government seeks to make a decision on a £10bn rescue takeover put forward by lenders for the UK’s biggest water supplier.

Ofwat’s announcement came after Burnham said customers must not be “treated as a blank cheque” and after the regulator said in August it planned to allow yet more bill increases on top of those already agreed.

A government spokesperson said: “This government won’t allow customers to be treated as a blank cheque, and we are committed to protecting households from cost-of-living pressures.

We will always challenge water companies where they seek to pass unnecessary costs on to households.

“We will deliver a strengthened water bill that puts people first, ensuring affordable access to clean water, driving down pollution, and strengthening public control.” A Yorkshire Water spokesperson said: “We recognise that our performance last year fell short of the standards we and our customers expect in some areas, and we remain focused on improving.

“We are already delivering Yorkshire’s largest ever environmental investment programme and with the help of over 1,000 new colleagues, we’ve completed improvements at almost 300 locations across the county.” A Thames Water spokesperson said: “To help smooth customer bills, Ofwat has agreed to defer the timing of some ODI penalties by one year.

This does not remove or reduce the penalties.

Customers still receive the full benefit, and Thames Water does not gain financially.

We recognise these penalties reflect areas where our performance fell short.

The deferral will prevent sharp year-on-year bill movements, which research shows our customers want us to avoid.” Explore more on these topicsWater industry Water bills Utilities Regulators Household bills Consumer affairs England news Share Reuse this content