Ofwat will apply a net underperformance penalty to South West Water of £2.09 million, for pollution incidents over the last two years.

In addition, Severn Trent and Anglian Water will benefit from financial incentives for outperformance, as the regulator confirmed the outcome delivery proposals for the three water companies today (15 December).

Severn Trent has done better than expected in reducing sewer flooding, which together with the company’s performance in other areas, will result in net outperformance payment of £38.4 million.

Ofwat has agreed the company’s proposals to only take £11.4 million of the payment next year.

The regulator has also approved an outperformance payment of £2.6 million for Anglian Water, reflecting its reduction in leakage levels.

All water companies have committed to improve their performance for 2015-20 based on customer consultation.

Jon Ashley, director of outcomes, said: “Our Outcome Delivery Incentives (ODI) framework is intended to ensure that companies are constantly focused on delivering what matters most to their customers. We have been very clear to all water companies, that as we head into our 2019 price review, they will need to be ever more ambitious and stretching in what they deliver for customers. “For companies that continuously raise the bar in terms of the service they provide, there will be hard-earned payments; companies that fail to perform will face stiff penalties.”

Ofwat announced a consultation on proposals for underperformance penalties and outperformance payments for South West Water, Severn Trent and Anglian Water on 31 October.