Nine water companies have been blocked from using customer money to pay executive bonuses under new regulatory measures introduced by Ofwat.
The regulator stated that “undeserved” bonuses are now being funded by company owners and lenders rather than through customer bills. Ofwat directly intervened to prevent Thames Water, Yorkshire Water, and Dwr Cymru Welsh Water from using £1.6 million of customer money for bonuses. Six other firms opted to use shareholder funds voluntarily to cover executive payouts.
David Black, Ofwat’s chief executive, emphasized that water companies must work to rebuild public trust. He said the move to stop customers from footing the bill for bonuses aims to “sharpen executive mindsets” and encourage firms to improve their performance and accountability.
When asked by the BBC’s Today programme about public confidence in Ofwat, particularly after the environment secretary criticized regulatory efforts as insufficient, Mr. Black defended the changes in regulation. “We have stepped in to protect customers’ interests and will continue to do so. Blocking undeserved bonuses is part of that effort,” he said.
Under Ofwat’s new rules, companies failing to meet environmental or performance targets cannot use customer funds to pay executive bonuses.
Thames Water Case
Thames Water’s chief executive, Chris Weston, who joined in January to lead the debt-ridden company’s turnaround, was awarded a £195,000 bonus for his first three months, bringing his total pay for the period to £437,000. While it is unclear if the bonus was paid, Ofwat’s regulations now require such payouts to be covered by the company’s owners, not customers. Thames Water declined to comment.
Thames Water faces unique challenges as it effectively lacks shareholders. Earlier this year, its owners withdrew a promised cash injection after Ofwat rejected their request for bill increases of 44% above inflation over five years, offering only 21% above inflation. The company’s lenders now hold de facto control.
Broader Industry Response
Other water companies, including heavily indebted Southern Water, have confirmed that executive bonuses will be covered by shareholders rather than customers.
Environment Secretary Steve Reed called it “disgraceful” that half of water firms had issued “unjustifiable” bonuses. He pledged to introduce “urgent legislation” to prevent such practices in the future. Mr. Reed has also highlighted broader issues of “regulation and governance” in the sector and commissioned an independent review, led by Sir John Cunliffe, former Deputy Governor of the Bank of England. The review’s findings are due in June 2025.
The final determination of water bills for the next five years is expected from Ofwat on December 19.
