Ofwat penalises Welsh Water over "indefensible" mistakes

(Sharecast News) - Welsh Water has been ordered to pay £40m after an investigation found the utility misled both customers and the regulator, it was confirmed on Thursday. Ofwat said its probe, formally launched in May 2023, had found that a "significant failure of governance and management oversight" had caused the company to misreport leakage and per capital consumption performance figures for five years.

In doing so, it "significantly" underplayed its poor performance, Ofwat added.

As a result, Welsh Water will provide redress of £39.4m to compensate customers. Of that, £15m has already been paid through a rebate of £10 per customer, while another £15m is absorbed additional leakage expenditure.

It will also pay an outcome delivery incentive underperformance payment for 2020-22 of £9.4m.

In addition, Welsh Water, which has 1.4m customers, has committed to invest a £59m in the current 2020-25 price review period to improve its leakage performance.

David Black, chief executive of the regulator, said: "For five years, Welsh water misled customers and regulators on its record of tackling leakage and saving water. It is simply indefensible and that is why we are making Welsh Water pay this £40m to benefit its customers.

"Today's announcement puts the industry on notice that we have the resources and will act when companies fail to meet their obligations to customers."

Pete Perry, chief executive of Welsh Water, said: "We are very sorry that this has happened.

"We proactively brought the issue to Ofwat's attention in April 2022, having identified it as part of our annual performance assurance process.

"Our review identified government and management oversight failures...which have now been addressed. Achieving the planned reduction in leakage will be challenging, but we have committed a substantial increase in expenditure in this area and strengthened the relevant operational teams to recover performance."

Welsh Water said it had been fined a nominal £1 by Ofwat having agreed the redress package.