United Utilities is anticipating a lower than forecast outperformance on outcome delivery incentives (ODIs) to the tune of £25 million, the company has said.
It remains on-track to earn around £40 million in outperformance payments for 2023/24, however it said extreme weather had adversely affected its performance for the year.
The northwest saw 33% more rain in 2023 than the long-term averages including 14 named storms. That was 50% more rain than the previous year, which saw many parts of the country plunged into drought conditions.
ODIs are financially or reputationally incentivised performance commitments agreed between Ofwat and water companies every five years. They can be common or bespoke relating to a range of water supply and wastewater as well as customer service and environmental targets.
In 2022/23, United Utilties met 38 of its 46 performance commitments, which earnt the company more than £25 million in outperformance.
Its profits were dented 27% last year by soaring power costs and having to respond to emergency events.
In its Q3 update for the penultimate year of the current asset management period (AMP7) the group said net ODI performance would be around £40 million for the year.
In a separate update, fellow listed water company Severn Trent said its own performance over 2023/24 gave the company confidence it would retain its 4-star rating from the Environment Agency. It will be the fifth consecutive year Severn Trent earns the top mark in the regulator’s system of grading water company environmental performance.
It also cited extreme rainfall as impacting its ODI performance for the year, but said it remains on track to earn “at least £50 million” in 2023/24 and around £250 million across AMP7.
For AMP8, Ofwat has said there will be fewer bespoke ODIs across the sector, but has also introduced new ODIs around reducing discharges from combined sewer overflow (CSOs).
United Utilities, which has the highest proportion of CSOs, pledged to spend c.£3 billion reducing spills by 60% across its region by 2030.