Ofwat has launched an investigation into Welsh Water’s reporting of leakage rates and per capita consumption (PCC).
The company alerted the regulator to issues it identified with its own performance calculations, which overstated headway on leakage and understated consumption progress in 2020/21 and 2021/22.
In November, Ofwat deferred making a decision on the company’s progress against targets for both metrics and raised questions about how the company calculated its reported figures.
This is the second company this week to face investigation after Ofwat raised concerns over South West’s leakage and PCC calculations.
“We are committed to holding companies to account for performance and for sharing timely, accurate, and complete data with us and their customers. We recognise that Welsh Water came to us when it became aware of the issue with the accuracy of its performance data,” David Black, Ofwat chief executive, said.
“Ofwat’s investigation will consider Welsh Water’s restated performance figures, the circumstances that led to the company reporting inaccurate performance, and what steps it has taken or is taking to address these failings.”
When Welsh identified the problem, it apologised to customers and announced a £10 rebate, as well as committing to invest £54 million to tackle leakage.
Ofwat said it will consider any remedial plans as part of its investigation, and its decision on any further action.
For 2021/22, Welsh Water failed to meet its leakage reduction target of -5.2% compared to a 2018 baseline. It reported a fall of 4.2% for the year, remaining below industry averages.
The company’s restated figures for total leakage for 2021/22 was 240.3 ml/d compared to 157.4 ml/d previously reported.
Welsh reviewed its own reporting and found “governance and management oversight failures”, which led to the accuracy problem. It said the lower level of leakage and higher consumption rate were “inherently linked”.
Restated PCC data shows a reduction from 174.7 litres/day to 154.8 litres/day.
The company’s PCC had been reported as the highest for companies in England and Wales compared to the sector average of 145 litres.
“We are very sorry and disappointed that this has happened,” Peter Perry, chief executive officer at Welsh Water, said. “We’re investing an additional £54 million over the next two years to identify and reduce leakage as quickly as possible and we have shared the findings of our investigations with our regulator.
“Whilst our robust assurance process ultimately identified the issue, there were failures in our governance and management oversight processes that allowed this in the first place. We have made the necessary changes to how we manage leakage reporting and closed the gaps in our reporting and governance processes.”
The outcome of the enforcement action could lead Ofwat to take necessary steps to bring the company back in-line with its obligations relating to leakage and PCC. The regulator can impose financial penalties of up to 10% of the company’s turnover.