Water bills likely to rise by more than expected, Ofwat says, despite bonus ban
Next month, the regulator is set to announce how much water companies can hike customers’ bills by.
Yorkshire Water is looking to increase bills by 35 per cent by 2029-30 to improve the company’s old infrastructure.
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Hide AdIn July, Ofwat estimated that water bills would need to increase by 21 per cent annually to help fund investment in the nation’s crumbling infrastructure, however now the regulator has said they could go up even more.
Chief executive David Black told the BBC: “We think it will be quite likely that there will be upward pressure on bills since our draft determinations.
“We need to see a transformation of the sector, we need to see more investment … we also need to see a change in culture and improvement in performance.
“Some increase in bills is justified, we will push back on bill increases … where they are seeking to increase returns excessively or impose costs on customers where they have not been justified.”
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Hide AdOfwat said owners and investors of the water firm will instead have to pick up the tab for the payouts after it found they were not linked closely enough to company performance.
It was revealed in July that Yorkshire Water chief executive Nicola Shaw was paid a £371,000 bonus on top of her £657,000 salary and benefits for the financial year ending March 2024.
Ms Shaw had forfeited her bonus the previous year due to outcry over sewage spills.
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While the company’s chief financial officer was paid a £245,000 bonus as well as his £436,000 salary and benefits for the same period.
This was despite the number of sewage permit breaches doubling between 2021 and 2023, according to a freedom of information request from the Lib Dems.
Ofwat said Yorkshire Water had reduced the bonuses, which combined add up to £616,000, “to reflect five serious pollution incidents and weather related incidents”.
However, the regulator questioned why either executive was given any pay award at all given the firm’s low Environmental Performance Assessment rating.
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Hide AdYorkshire Water’s score of two stars signifies a below average company.
Environment Secretary Steve Reed said the bonus payouts were “unjustifiable”.
Mr Black said: “In stopping customers from paying for undeserved bonuses that do not properly reflect performance, we are looking to sharpen executive mindsets and push companies to improve their performance and culture of accountability.
“While we are starting to see companies take some positive steps, they need to do more to rebuild public trust.”
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Hide AdOfwat said it would be able to block bonus payouts entirely under the new water Bill being brought by the Government.
Mr Reed added: “It is disgraceful that half of water companies have given out unjustifiable and unmerited bonuses.
“That is why this Government is introducing urgent legislation to ban the payment of unfair bonuses to polluting water bosses so payouts of this kind can never happen again.”
It comes at a time of growing public and political pressure on the sector to address a dire recent performance on pollution and leaks while customer bills are soaring.
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Hide AdSewage spills have contributed to a situation in which no single river in Yorkshire is considered to be in good overall health, with activists finding 10 times the normal levels of E.coli at Knaresborough Lido.
Vanda Murray, chair of Yorkshire Water, said: "Ofwat's executive remuneration report has outlined changes in the way executives should be paid.
“Our board and remuneration committee understand the strength of feeling about rewarding executives and believe it is important to reward performance to attract and retain the right calibre of talent to drive forward our improvement plans at a hugely difficult time for the sector.
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Hide Ad“We reflected hard on the performance of the business through various metrics at the end of 23/24. These metrics included environmental performance but also important measures such as customer service and leakage where the business delivered well.
“The outcome against the performance measures was a 61.2 per cent bonus of the maximum allowance, which was reduced by the independent remuneration committee to 42.2 cent (a reduction of around a third) to take into account the company’s environmental performance not being where we wanted it to be.
"Nevertheless, Ofwat has made a clear statement today and we will be reflecting on their comments.”
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