Water companies face £240 million of proposed penalties after missing performance targets, with Thames Water and Yorkshire Water among those facing the largest reductions.
Ofwat’s draft Outcome Delivery Incentive decisions for 2025/26 would cut the amount companies can recover from customers after failures on measures including leakage, customer service and other agreed performance targets.
Around £107 million of the overall adjustment is expected to feed through into bills in 2027/28, with the remainder reflected through later regulatory adjustments.
The system is designed to reward companies that beat their targets and reduce revenues for those that fall short, so the £240 million figure is a net sector-wide adjustment rather than a single fine.
Yorkshire Water and Thames Water face some of the biggest underperformance payments, while companies including Severn Trent and Northumbrian Water are set to receive rewards for stronger performance.
The effect on household bills will therefore vary by region and supplier, with some customers seeing larger reductions than others. Ofwat will consult on the draft figures before publishing final determinations by 15 December, with bill changes taking effect from 1 April 2027.
The penalties come as the industry begins a £104 billion investment programme running to 2030, covering sewage treatment, leakage, water resilience and wider infrastructure upgrades.
That means the regulator is trying to balance two pressures at once: keeping enough money in the sector to fund investment while making sure customers do not pay for performance that has not been delivered.
For households, the key point is that underperformance is now feeding directly back into bills, although the actual saving will depend on where they live and which company supplies them.
The latest determinations also add to pressure on companies already facing scrutiny over pollution, leakage and service standards as they begin one of the biggest investment programmes in the sector’s history.
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