Compensation for households could double under new water reforms but bills still rising

Government reforms aim at ending the crisis in the water sector could double compensation owed to customers when standards are not met. 

Compensation could more than double when water companies fail to meet basic water service standards – including when boil water notices are issued.

The government announced new reforms that include giving water customers stronger protections and the power to hold water companies to account for poor performance and sewage dumping.

Steve Reed, secretary of state for environment, food and rural affairs, said:

‘We will never look the other way while water companies pump sewage into our rivers, lakes and seas.

‘This unacceptable destruction of our waterways should never have been allowed, but change has now begun so it can never happen again.

‘Today I have announced significant steps to clean up the water industry to cut sewage pollution, protect customers and attract investment to upgrade its crumbling infrastructure.’

The announcement from the environment secretary comes as Ofwat publishes its response to planned water company spending.

Under Ofwat’s draft proposals, household water bills in England and Wales are to rise by an average £19 a year over the next five years – a third less than the increase requested by companies.

Claiming compensation from water companies

The amount of compensation customers are legally entitled to when key standards are not met will more than double, under the new reforms.  

Under current rules, water companies must automatically compensate customers when certain standards of service haven’t been met. 

These cover things such as making and keeping appointments, maintaining the right water pressure, dealing with supply interruptions and responding properly to queries and complaints.

The payments under the new rules will be triggered by a wider set of circumstances including Boil Water Notices, which indicate that routine water quality tests have revealed the presence of bacteria in the water supply. 

For now, your water company should automatically compensate you when it doesn’t meet the current agreed standards – and it will compensate you again if it’s late with its payment. 

Ofwat sets out minimum levels of compensation water companies should pay – see our table, below. But ask your water company for details on what they pay because they may voluntarily go above these levels.

Problem	Compensation	Late payment penalty
Appointments not made or kept	£20	£10
Low water pressure incidents	£25	None.
Incorrect notice of planned interruption	£20	£20
Supply not restored within an agreed period	£20	£20
Supply not restored for each 24 hours beyond above agreed period	£10	£20
Complaints and queries not responded to on time	£20	£10
Sewer flooding inside your property	£150 to £1,000 (payment equal to annual sewerage charges)	£20
Sewer flooding in your garden or drive	£75 to £500 (payment equal to 50% of annual sewerage charges)	£20

Ofwat’s announced today that it is also introducing a ‘clawback mechanism’ in which customers will see money taken off their bills if their water company ‘fails to make the improvements they have promised to deliver’ in their business plans.

It is aiming for this to provide extra protection for customers and encourage companies to invest quickly to improve services and benefit the environment.

Trust in water companies at an all-time low

Customers need serious convincing that companies can be trusted to protect the environment. Household trust in water companies hit an all-time low earlier this year – with concerns over companies’ environmental performance being a key issue.

Sewage spills into England’s rivers and seas more than doubled in 2023. According to the Environment Agency, there were 3.6 million hours of spills last year compared with 1.75 million hours in 2022.

The large amount of water lost to leaks in the system also raises widespread concerns, particularly in dry periods when consumers face hosepipe bans.

The new reforms from the environment secretary require companies to change the way they are run to make customers and the environment their number one priority.

Commenting on the reforms, Professor Carolyn Roberts, a water and environmental consultant and scientist, said: 

‘This is a positive first step towards much needed reform. 

‘We’ve seen very little investment over the past two decades that has resulted in beneficial results for customers or the environment. 

‘So this step change in focus onto both customers and the environment is wonderful news for customers of water companies, as well as our shared heritage.’

‘And it’s another signal that water companies should be held accountable for their actions, especially the illegal dumping of sewage into our waterways.’

Legal action against water companies over pollution concerns

Professor Roberts is taking legal action against six water companies on behalf of 20 million households over allegations of under-reporting pollution incidents and over-charging customers as a result. 

Anglian Water, Northumbrian Water, Severn Trent Water, Thames Water, United Utilities Water, and Yorkshire Water are all accused of failing to reveal the true scale of sewage discharges and spills made into UK waterways.

They are accused of breaching competition law because any under-reporting could have affected the price they could charge customers.

The competition court will consider whether to grant permission for the claims to go to trial at a hearing starting on 23 September.  

Higher water bills a ‘bitter pill’ to swallow

Water companies had proposed increases averaging £144 over the next five years. But Ofwat has said it will limit rises to an average 21%, around £19 per year, until 2030.

For example, Thames Water’s proposed increase of £191 by 2030 has been reduced to £99, while Severn Trent’s proposed rise of £144 has been cut to £93.

Ofwat said its scrutiny of companies’ cost proposals, to ensure they deliver efficiently, had led to a £16 billion reduction. Water companies had proposed to increase their total spending by £29 billion. 

Chancellor Rachel Reeves said the prospect of water bills rising amid the sewage pollution scandal and cost-of-living crisis was a ‘bitter pill’ for consumers.

Asked about the draft proposals from Ofwat, the Chancellor said: ‘It’s clearly a bitter pill for people who are seeing today’s announcements about higher water bills.

‘This reflects 14 years of failure from the Conservatives to drive investment to reduce pollution, and to ensure that families are not struggling the way that they have been with the cost-of-living crisis.’

She added: ‘It’s why the Secretary of State for Environment, Steve Reed, has called in the 16 bosses of the water companies today.

‘Also, we’ve already announced tough new rules to ensure that money that is supposed to go into infrastructure cannot just be paid out in bonuses, and tougher rules around polluting as well.

‘We’re determined to get a grip on the water sector so it delivers for consumers, and so that we stop polluting our beautiful seas and rivers. We will get a grip of that.’

Ofwat chief executive David Black said: ‘Customers want to see radical change in the way water companies care for the environment. Our draft decisions on company plans approve a tripling of investment to make sustained improvement to customer service and the environment at a fair price for customers.

‘These proposals aim to deliver a 44% reduction in spills from storm overflows compared to levels in 2021. We expect all companies to embrace innovation and go further and faster to reduce spills wherever possible.

‘Today’s announcement also increases the resilience of our water supplies to the impact of climate change and will reduce how much water is taken from rivers by enabling a range of long-term water supply projects, which includes plans for nine reservoirs.

‘Let me be very clear to water companies – we will be closely scrutinising the delivery of their plans and will hold them to account to deliver real improvements to the environment and for customers and on their investment programmes.’

Mike Keil, chief executive of the Consumer Council for Water (CCW), said: ‘Millions of people will feel upset and anxious at the prospect of these water bill rises and question the fairness of them given some water companies’ track record of failure and poor service.

‘Customers understand investment is urgently needed but they need reassurance that every pound of their money is going to be well spent.

‘Trust in water companies has never been lower and that won’t change until people see and experience a difference – whether that’s having the confidence to swim at their favourite beach or receiving help if they are struggling to pay their bill.

‘We estimate about two million households in England and Wales currently cannot afford their water bill and, while the increase in financial assistance is welcome, it falls short of what is needed.

‘Over the summer we’ll be carrying out research with customers of every water company to gauge whether they feel the regulator’s proposals are affordable and deliver what people want. We expect Ofwat to listen and act on what customers tell us.’

The proposals are part of the 2024 Price Review (PR24) and cover the period from 1 April 2025 to 31 March 2030, ahead of a final decision at the end of the year.