Nine water firms banned from using customer bills to fund bonuses

Nine water companies have been banned from using customer money to fund "undeserved" bonuses for bosses, the regulator announced on Thursday.

Ofwat said the utilities had fallen foul of new rules that require water firms to demonstrate executive bonuses are sufficiently linked to company performance.

As a result, they will not be able to use customer money to fund £6.8m of bonuses, around 73% of all payouts.

David Black, Ofwat chief executive, said: "In stopping customers from paying for undeserved bonuses that do not properly reflect performance, we are looking to sharpen executive mindsets and push companies to improve their performance and culture of accountability."

It has directly blocked three companies - Thames Water, Yorkshire Water and Dwr Cymru Welsh Water - from funding £1.5m of bonuses.

The three firms "have not adequately reflected overall company performance issues in their bonus payments," Ofwat said.

The remaining six companies, including South East Water and Portsmouth Water, have voluntarily agreed that shareholders will fund bonuses.

Ofwat introduced new financial rules for water firms a year ago, in response to growing outcry over soaring executive pay, high levels of debt, dividend payouts, a failure to invest in infrastructure and dire performance, including multiple leaks and sewage discharges.

Vastly-indebted Thames Water is attempting to stave off renationalisation after its shareholders declared the crisis-struck business "uninvestable" in March.

However, Chris Weston - who joined as chief executive in January - received a £195,000 bonuses for the three months to March end.

Black said: "While we are starting to see companies take some positive steps, they need to do more to rebuild public trust."

Ofwat said firms had paid out £1bn in dividends in 2023-24, £400m less than the previous year. Thames Water, South East Water and Southern Water are currently subject to cash lock-up measures which prohibit them from paying dividends without consent.

These three firms are on Ofwat’s "action required" list. A number of other companies will also face heightened scrutiny, however, after being placed on the "elevated concern" list. These include Affinity Water, Northumbrian Water, South Staffs Water and Wessex Water, among others.