Compensation for water supply problems to double from next year

Water companies to be forced to pay new and ‘significantly higher’ compensation to customers for service failures

Water firms are to be forced to significantly increase compensation payments to customers affected by failures such as supply outages, sewer flooding or low water pressure, the Government has said.

Customers who suffer problems like low water pressure could receive payments of up to £250, while households affected by flooding inside their homes from sewers could receive £2,000 or more, compared to £1,000 under current rules.

The list of circumstances that can trigger compensation will also be extended to include situations when Boil Notices are issued by water companies when drinking water quality standards drop, or when firms fail to conduct meter readings or installations on time.

Steve Reed, Secretary of State for Environment, Food and Rural Affairs, said:

‘Customers have too often been let down by water companies, with supply cut off, low water pressure and in some cases even contaminated tap water.

‘We are clear that the public deserve better compensation when things go wrong, so I’m taking action to make sure that happens.’

The changes – expected to come into force next year – follow a public consultation which found an average of 84% of water customers agreed with the proposals, as did 70% of businesses.

Overhaul of current standards are ‘long overdue’

Payment rates when water service standards are not met have remained unchanged since 2000, meaning reform is long overdue, the Department for Environment, Food and Rural Affairs (Defra) said.

Some water companies voluntarily offer compensation to customers who experience interruptions to their supply or other problems, but there is no statutory requirement to do so and rates can vary significantly depending on where you live.

Compensation for residents in South Staffordshire whose water supply was disrupted last month due to a burst water main was not compulsory, but households could have received a £150 payment and £300 for businesses under the new rules.

A ‘Do Not Drink’ notice for 600 properties in Bramley, Sussex, after a fuel leak in May resulted in Thames Water offering a £30 voluntary payment, but under new rules could trigger a compulsory payment of £220 for households and £440 for businesses. 

There was no entitlement to compensation for those caught up in the cryptosporidium outbreak in Brixham, Devon, but those customers could now receive at least £10 per 24 hours, potentially amounting to more than £500 over eight weeks for similar incidents.

Stronger incentives for water companies to put things right 

Mike Keil, chief executive of the Consumer Council for Water (CCW), said: ‘The current Guaranteed Standards Scheme is not fit for purpose, so we welcome the swift action the Government has taken to bring about long-overdue improvements.

‘The increased payment levels when things go wrong, alongside fewer reasons for companies to avoid making payments, means that there are far greater incentives for water companies to get things right first time. The overhaul of these standards marks a step forward in improving consumer protection and repairing fractured trust in the water sector.

The Guaranteed Standards Scheme (GSS) sets expectations for customer service in the water sector, including timely restoration of water supply after interruptions, prompt responses to written complaints, and effective management of sewer flooding risks.

They set out expectations for the minimum levels of compensation water companies should currently pay when standards are not met – see our table.

The new proposals will increase and make these payments compulsory.

Table of existing levels of compensation customers are legally entitled to:

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

Major review into the water sector

Strengthened consumer protection and compensation are the government’s first steps towards ending the crisis in the water sector, said Defra.  

A new Water (Special Measures) Bill, which has its second reading in the House of Commons this week, will:  

• Strengthen regulation to ensure water bosses face personal criminal liability for lawbreaking. 
• Give the water regulator new powers to ban the payment of bonuses if environmental standards are not met. 
• Introduce new powers to bring automatic and severe fines. 
• Require water companies to install real-time monitors at every sewage outlet with data independently scrutinised by the water regulators. 
• Give Ofwat the power to set rules to increase customer representation in decision-making to hold companies to account. 

The government has also launched a major review of the water companies, creating an Independent Commission to examine the water sector and its regulation.  

Household bills to rise by an average of £31 from April

*19-December update*

Household water bills in England and Wales will increase by an average £31 a year over the next five years, regulator Ofwat has announced.

The increase is significantly higher than the expected average rise of around £20 a year per household, outlined in the regulator’s draft proposals in July.

Ofwat said the increase would pay for a £104 billion upgrade of the water sector to deliver ‘substantial, lasting, improvements for customers and the environment’.

However, despite the average £31 a year increase figure, households will face a heavy average hike of £86 or 20% in the next year, excluding inflation, with smaller percentage increases in each of the next four years.

The average bill will rise by a total of £157 or 36% over the next five years.

Ofwat chief executive David Black said: ‘Today marks a significant moment. It provides water companies with an opportunity to regain customers’ trust by using this £104 billion upgrade to turn around their environmental record and improve services to customers.

‘Water companies now need to rise to this challenge, customers will rightly expect them to show they can deliver significant improvement over time to justify the increase in bills.

‘Alongside the step up in investment, we need to see a transformation in companies’ culture and performance. We will monitor and hold companies to account on their investment programmes and improvements.

‘We recognise it is a difficult time for many, and we are acutely aware of the impact that bill increases will have for some customers. That is why it is vital that companies are stepping up their support for customers who struggle to pay.

‘We have robustly examined all funding requests to make sure they provide value for money and deliver real improvements, while ensuring the sector can attract the levels of investment it needs to meet environmental requirements.

‘This has seen us remove £8bn of unjustified costs compared with companies most recent requests. In addition, our approach to setting a rate of return has saved customers £2.8 billion.’

Ofwat said it had cut Southern Water’s requested increase by £126 (16%), Thames Water’s by £79 (12%), Hafren Dyfrdwy’s by £73 (12%) and Wessex Water’s by £44 (7%).

Legal action against water companies over pollution concerns

The competition court is currently considering whether to grant permission for a claim against six water companies to go to trial.

Professor Carolyn 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.