Water companies face ‘significant fines’ for poor customer service

Ofwat has new powers to impose fines of up to 10% of the company’s turnover for poor customer service but can’t tell companies to compensate customers.

Water companies can now be fined up to 10% of their turnover for poor customer service, under new powers given to the water regulator for England and Wales.

Ofwat said there are too many instances where customers feel let down and their supplier does not have their best interests at heart.

David Black, the chief executive of the regulator, said:

‘From today we are putting water companies on notice to improve customer service and, where we see failure, Ofwat can and will take action which could result in significant fines.’

However, Ofwat does not have the power to direct companies to pay compensation to customers for a breach of its licence condition.

Water companies expected to deliver better customer service

Ofwat introduced new expectations designed to protect consumers. Water companies are expected to make it easy for customers to contact them and act quickly to fix things that go wrong with a household’s water supply.

Its new licence requirements also gives the regulator the power to block companies paying out money to shareholders if they fail to meet performance standards, and impose fines.

Ofwat said it thinks being able to impose penalties to suppliers not treating customers fairly will ‘deliver real improvements in customer service across the sector.

‘It is in the companies’ interests to put customers at the heart of their business and provide levels of service that increase customer satisfaction,’ Mr Black added.

Companies can’t be told to pay compensation to customers

Companies plan to increase consumers’ bills by 6% or about £27 to £473 a year from April. Yet, Ofwat does not have the power to tell companies to pay compensation to customers for poor service.

Tim Farron MP, the Liberal Democrat Environment spokesperson, said: ‘Money should instead go right back in the pockets of the people affected, through compensation from the water firms.

‘All those who suffered endless water outages without compensation, especially Thames Water customers, will have their heads in their hands at this latest announcement. This is yet more macho talk from a regulator which is about as tough as a wet paper bag.’

The regulator said that it can ‘accept undertakings’ from companies found in breach of its rules – including compensation payments or bill rebates.

Thames Water paid £65 million back to customers in 2018 for failing to tackle leakages and Southern returned £123 million to wastewater customers in 2019 for poor performance at wastewater treatment sites.

Customers feeling let down by water companies

Ofwat’s latest performance report shows there has been a fall in customer satisfaction across most of the companies it regulates.

A report the Consumer Council for Water (CCW) in September found that Southern Water was the most complained-about company.

Complaints received by Southern Water were almost three times higher than the overall average for water and sewerage companies, while Thames Water’s were just over one-and-a-half times higher.

More than 230,000 complaints were made to water companies in England and Wales by households in 2022 to 2023.

Mike Keil, chief executive of the CCW, said: ‘Every water company should provide excellent customer service but too often through our research and the complaints we handle we see people being badly let down, particularly by poor communication.

‘A complete change in culture is needed in some companies if we’re to improve people’s experiences and repair fractured trust, and the new customer licence condition can help to focus minds.’

Bonuses from polluting water companies to be blocked

Environment Secretary Steve Barclay is set to block payouts to executives of firms that are polluting rivers, lakes and seas, starting with bonuses in the 2024-25 financial year from April.

Environment Secretary Steve Barclay said: ‘We expect water companies to ensure customers are properly supported when services are disrupted.

‘We are driving forward more investment, stronger regulation and tougher enforcement through the Plan for Water and will continue working closely with regulators to improve outcomes for both customers and the environment.’

Water companies accused of underreporting sewage spills

Legal claims seeking compensation for customers have been filed in the competition court against Anglian Water, Northumbrian Water, Severn Trent Water, United Utilities and Yorkshire Water. A claim against Thames Water is expected to be filed soon.

Professor Carolyn Roberts, the environment and water consultant behind the claims, alleges these companies have failed to properly report sewage spills and pollution of rivers and seas to the Environment Agency and Ofwat.

Professor Roberts said: ‘Water companies need to ensure that they meet their customers’ needs as a priority – whether providing good quality water to our houses or effective sewage treatment so that our shared natural environment is preserved for future generations.

‘Beyond that they need to be planning for a future where climate change is adding to the pressure. It’s customers, not shareholders, with whom their first priorities should lie.’