Ofwat’s scheme to fine poorly performing companies ‘a gimmick’ | Water industry

A new scheme to fine water companies for providing poor service to customers has been dismissed as “nothing less than a gimmick” – as the money raised in fines will not go to consumers affected.

On Monday, Ofwat unveiled sanctions for water companies that do not provide good communication and help to those who face problems such as having no running water.

Throughout recent months, households across London, Hampshire, Surrey, Sussex and Kent went without water following storms and cold weather. Critics have blamed ageing infrastructure for the burst pipes, which cause outages. Households complained that bottled water was not made available in good time, and that they were not provided with updates and information about the situation.

The new rules on customer service could allow the regulator to impose fines of up to 10% of the company’s turnover. These fines go back to the Treasury rather than to reduce bills for consumers.

Ofwat pointed to recent figures, published in the annual water company performance report, which show that in 2022-23 there was a fall in customer satisfaction across most companies. This follows a decline in scores in 2021-22, and customer satisfaction is lower for all companies than it was in 2020-21.

Announcing the charges, Ofwat acknowledged that customers face “confusion” and “anxiety” when companies do not provide adequate communication and support when “things go wrong”.

The Guardian recently revealed that Ofwat’s chief executive, Iain Coucher, has been having dinners in a expensive private members’ club with water company bosses to discuss how to manage consumer anger about sewage spills and increased bills.

The Liberal Democrats’ environment spokesperson, Tim Farron, said: “This isn’t up to scratch and is nothing less than a gimmick.

“Money should instead go right back in the pockets of the people affected, through compensation from the water firms. Why are people paying for a service they simply aren’t receiving? Conservative ministers need to get a grip on this and give people their money back when the taps don’t run and water firms mess up.

“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.”

Ofwat and the Department for Environment, Food and Rural Affairs claimed that the fines would improve customer satisfaction.

David Black, CEO of Ofwat, 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.

“Our new powers to issue fines for poor levels of service are part of a range of measures Ofwat has recently introduced including on environmental protection, company dividends and executive pay, to drive better performance and to hold water companies to account.

“We expect this new licence condition to 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.”

Steve Barclay, the environment secretary, said: “We expect water companies to ensure customers are properly supported when services are disrupted.

“Enforcement action for poor customer service is an important and necessary step to restoring trust in the water sector and has been made possible thanks to government giving Ofwat increased powers to modify the licences of companies in England under the Environment Act.”