Thames Water returning £73.8m to customers under Ofwat determinations

Thames WaterSharecast graphic / Josh White

UK water regulator Ofwat announced the financial penalties and payments for all water companies for 2022-2023 on Tuesday, with Thames Water set to return the most money to customers.

Ofwat said most water companies would be required to return money to customers as part of their determinations, including funding for a green recovery program.

Among the companies, Thames Water was set to make the most significant return to customers, with a final determination of £73.8m.

That followed the earlier release of draft decisions in September, which underwent a consultation ending on 18 October.

Ofwat noted that the final revenue adjustment applied to the 2024-2025 period could differ from the reported outcome delivery incentive (ODI) payments for the same year due to additional adjustments.

For instance, Severn Trent's revenue adjustment included extra funding for green recovery investment and the recovery of deferred outcome delivery incentive payments from previous years.

Ofwat said it also implemented changes for specific companies compared to the draft decisions.

Notably, Southern Water would return an additional £21m to customers, deferred to the 2025-2026 fiscal year.

To ensure fairness to customers, Ofwat said it adjusted the size of water companies' net ODI payments to reflect their marginal corporation tax rates.

That, the regulator said, would ensure that companies receive the level of ODI payments intended in the price review 2019 (PR19) final determinations, maintaining the financial incentives originally envisioned.

Thames Water and Anglian Water, in particular, had a 0% tax rate applied to them, factoring in additional evidence submitted by the companies, including information on tax losses and the benefits of 'bill smoothing' measures.

Full list of Ofwat final determinations for 2024-2025: