WIREDGOV

Ofwat yesterday confirmed the financial penalties and payments for all water companies for the 2022-23 year, with the majority of companies having to return money to customers.

The determinations also include funding for the green recovery programme.

Thames Water will return the most to customers, with a final determination of £73.8m.

The final determination follows on from the announcement of draft decisions in September, the consultation for which closed on 18 October 2023.

Notes to Editors

• The links to the final decisions can be found on the Ofwat website.
• For some companies the final revenue adjustment that will be applied to 2024-25 can differ from the reported outcome delivery incentive (ODI) payments for the year because other adjustments may be included. For example, Severn Trent’s revenue adjustment includes additional funding for Green Recovery investment, and the recovery of deferred outcome delivery incentive payments from previous years.
• There are some changes for specific companies from the draft decisions.
  • The amount being returned to customers by Southern Water accounts for an additional £21m which will be deferred to 2025-26
  • We adjust the size of water companies’ net ODI payments to reflect their marginal rate of corporation tax. This ensures that companies receive the level of ODI payments as envisaged in the PR19 final determinations, which maintains the degree of financial incentive intended by PR19. If we did not do this, the financial incentives PR19 intended for companies would be weakened. A 0% tax rate has been applied to Thames Water and Anglian Water, after adjusting for the funding those companies received at PR19 (when it was assumed that they would pay some tax during 2020-25) to ensure fairness to customers. This change is based on additional evidence submitted by the companies, including substantive detail on their tax losses, as well as the benefits of ‘bill smoothing’ measures.
• We carry out in depth analysis of water company performance through publications such as our Water Company Performance Report and Monitoring Financial Resilience report.
• Our 2019 price control determinations set the price and service packages that companies have to deliver through to 2025. The ODIs are the financial or reputational consequences for companies of outperformance or underperformance against their performance commitments. Performance against the majority of performance commitments is reviewed annually so the financial consequences happen close in time to company performance and customer experience. The payments will affect the amount of revenue companies can recover from customers through their 2024-25 bills.