SWW £1.7m penalty could be deferred to 2019

A penalty of £1.7 million imposed on South West Water for missing wastewater pollution targets could be deferred to 2019, under proposals by Ofwat.

The regulator has said it will consider accepting the water company’s proposal not to apply the penalty in 2017-18, instead deferring the payment to the 2019 price review, in order to smooth bills.

Ofwat is also consulting on performance rewards for two companies – Severn Trent and Anglian Water – which have exceeded their commitments.

South West Water runs a WaterShare scheme in which it shares financial benefits gained from beating targets with customers. The independent panel which oversees WaterShare has proposed deferring the penalty to the 2019 price review, to offset rewards the company will be due at that point as a result of beating other performance commitments.

Ofwat has agreed to consider the timing of the penalty again next year when it assesses the company’s performance. At that point the regulator will decide when to apply the penalty. The penalty will be uprated in line with inflation and interest.

In response, South West Water insisted it is making “good progress” in the delivery of its highly-rated 2015-20 business plan, which was shaped by its “biggest ever” consultation with customers.

However, the company acknowledged that its performance around wastewater pollution “did not meet the stretching targets it set itself”. It is “committed to making significant improvements and progress is already being made, following extra investment, training and a detailed review of processes and delivery methods”.

Meanwhile, Severn Trent beat its commitments on pollution incidents by 32 per cent, internal sewer flooding by 21 per cent, external sewer flooding by 7 per cent and leakage by 2 per cent. Therefore, Ofwat is considering on a reward worth £18.8 million.

Anglian Water has performed better than its commitment on leakage by 1.5 per cent, and could receive a reward of £0.5 million.

The Consumer Council for Water has said it disagrees with the concept of outcome delivery incentives, as customers are “opposed to rewards for what they saw as companies doing the day job, and were lukewarm about penalties”.

Central and Eastern chair Bernard Crump said: “While we recognise that Anglian and Severn Trent improved their performance last year, they did so against targets that were – in some instances – less challenging than they could have been.

“The result is bill increases for customers. Those companies will need to explain to customers why their bills are rising faster than they would have done had ODIs not existed.”

Ofwat’s consultation closes on 22 November.