Water companies in England are using loopholes in order to not pay people who are left for days without running water, the CEO of the regulator has said.
Tens of thousands of homes across the country have been left without water for days this year as ageing pipes burst.
In May, 32,500 properties in Hastings and St Leonards-on-Sea had no service after a mains pipe burst, with some homes left without running water for five days. In January, households across Reading also faced an interruption to their water supply.
Ofwat chair, David Black, told the parliament’s environment, food and rural affairs committee that the rules need to be changed by government so those in areas with disruption to water supply get paid compensation automatically.
At the moment, companies are able to avoid paying compensation to those left without running water if they can claim it was due to an “extreme event”.
Black said: “The difficult issue is the way the standards are currently drafted as they allow exemptions for extreme events. Our worry is companies use these to avoid a responsibility – we think those rules should be changed but that’s not our responsibility. We have to follow the rules that are set by Defra [the Department for Environment, Food and Rural Affairs]. I think the regime needs to be changed so compensation is automatically provided where customers are off supply regardless of whether there is an extreme weather event.”
He added that only three water companies out of 17 meet Ofwat’s targets for providing a consistent supply of tap water to customers.
Ofwat’s representatives also told the committee that Labour’s new water bill won’t necessarily ban bonuses for CEOs of polluting water companies. Steve Reed, the environment secretary, recently promised “this government is urgently introducing laws to ban the payment of unfair bonuses to polluting water bosses”. The new bill gives regulators powers to ban bonuses for water company CEOs who fail to meet environmental and consumer standards, and if their company is not financially resilient. These environmental standards have not yet been decided by the regulator.
Last year, Liv Garfield of Severn Trent took a £584,000 bonus despite her company having been fined £2m for dumping sewage, and the firm scored highly on the EA’s environment rankings even with this human waste spillage taken into account.
Helen Campbell, senior director for sector performance at Ofwat, explained the new rules. She said: “It is not for Ofwat to decide exactly how companies should remunerate their executives. We expect companies to set out how bonuses are justified against performance delivery and through the extra measures that we will introduce – we will be very clear on circumstances where they are not justified. For example, if a company has received a criminal conviction we would expect the company to explain extremely clearly why those bonuses are justified despite that.”
A Water UK spokesperson said: “Water companies regularly pay compensation above and beyond the requirements set by the government. Compensation is only needed because our infrastructure is increasingly unable to cope with the growing pressures of climate change. Ofwat needs to approve the urgent investment companies are planning for the improvement of our country’s resilience to extreme weather.”
