Thames Water has been blocked from using customers’ money to fund “undeserved” bonuses for top bosses, the water regulator has announced.
Ofwat said it had stepped in to use its new powers to halt water companies that cannot show that bonuses are sufficiently linked to performance from using customer money to fund the payouts, amounting to 73% of the total executive awards proposed across the industry.
Debt-laden Thames Water is among three firms, also including Yorkshire Water, and Dwr Cymru Welsh Water, which were directly blocked from allowing customers to pay £1.5 million of bonuses.
Ofwat said a further six companies had voluntarily decided not to push the cost of executive bonuses worth a combined £5.2 million onto customers, with shareholders instead paying.
David Black, chief executive of Ofwat, 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.
“While we are starting to see companies take some positive steps, they need to do more to rebuild public trust.”
In August, Thames Water proposed hiking average customer bills by more than 50 per cent by 2030 in a new business plan for the coming years.
In its response to Ofwat’s draft determination on water companies’ plans, Thames suggested raising average yearly water bills to £666.50 per customer by 2030, a 52% rise.
Such an increase would mean the average bill over the five-year period from 2025 to 2030 would be £638.
The hefty hike is an increase on Ofwat’s proposal of raising bills by 23% over the period, which the regulator put forward in July.
Just days ago, Southern Water suffered another credit rating downgrade, with Fitch bumping the struggling utility company’s debt to one step above junk status.
Fitch announced the move on Tuesday, citing “challenging funding conditions” and the growing risk that it will default on its debt.
The ratings agency also placed Southern Water on “rating watch negative”, which means it thinks the company could face further downgrades.
Fitch said the negative outlook is partly because of the risk that Ofwat will not allow Southern Water to raise bills by as much as it wants over the next five years, therefore worsening its financial position.
Southern has asked to be allowed to raise the average consumer water bill by 84% over the coming five years versus the current level.
But Ofwat indicated over the summer that it will only allow a rise of about 44%.
Southern Water, which supplies 4.7 million people across the south and south-east of England, is controlled by Macquarie, the Australian investment bank.
Macquarie was a major investor in Thames Water during the years when it also piled up billions of pounds worth of debt, which has led it to seek emergency funding in recent weeks to keep the company running.
