Welsh Water has been ordered to compensate its customers almost £40 million for failings related to leakage and per capita consumption (PCC) data.
An Ofwat investigation found that the water company had misreported its leakage and PCC performance figures over a period of five years, “significantly underplaying its poor performance”.
Welsh Water will have to provide £39.4 million of redress for customers to compensate them for its failures, Ofwat said. Of this £15 million has already been announced by Welsh Water, with another £9.4 million to follow, which will lower bills for customers.
An additional £15 million of costs will be absorbed by Welsh Water, rather than passed on to customers.
David Black, CEO at Ofwat said: “We need to invest tens of billions of pounds over the next 30 years to reduce pollution and ensure that our water infrastructure can grow with our population and adapt for climate change. Customers and investors will only agree to fund this if they trust water companies to provide accurate information about their performance.
“For five years, Welsh Water misled customers and regulators on its record of tackling leakage and saving water. It is simply indefensible and that is why we are making Welsh Water pay this £40m to benefit its customers.
“Today’s announcement puts the industry on notice that we have the resources and will act when companies fail to meet their obligations to customers.”
The investigation was launched after Welsh Water identified issues with its reporting and self-notified Ofwat.
Ofwat’s subsequent investigation found evidence that a significant failure of governance and management oversight led to the water company misreporting its leakage and PCC performance figures over a period of five years.
In addition to that customer redress, Welsh has committed to invest an additional £59 million in the current 2020-25 price review period to address poor performance.
Peter Perry, Welsh Water chief executive, said the company was “very sorry that this happened”.
“We proactively brought this issue to Ofwat’s attention in April 2022 having identified it as part of our annual performance assurance process,” he said.
“Ofwat’s key conclusions as to what went wrong align with our own investigations that were shared with Ofwat together with our proposals for customer redress and additional investment to tackle leakage and per capita consumption.”
The UK has set an ambitious target to reduce the use of public water supply per person by 20% by 2038, compared to 2018 usage levels.
Earlier this week, Thames Water demand reduction manager Andrew Tucked called for a rethink of metrics and targets used to drive down water consumption across the country.
Tucker labelled the PCC metric used to measure household water usage as “extremely problematic” and called for water consumption measures to be rolled out across all sectors.
Welsh Water future plans
As part of its PR24 submission Welsh Water has proposed bill rises that 47% of customers would find difficult to pay, but are nevertheless supportive of.
The company’s ambition to 2030 was laid out in its PR24 submission to Ofwat in October, which included a £5.1 billion investment programme, up from just under £3 billion of spending for the current asset management period (AMP7).
Bills are expected to rise by a quarter (26%) by 2030 compared to 2025 for customers of the only not-for-profit water company.
Customer surveying revealed almost half (47%) said the rise to £581 would be difficult to afford, however 84% still supported the plan and the proposed improvements the company wants to make.
Welsh Water will commit £65 million to extend its social tariffs to reach 190,000 households.
Wholesale spend of £4.8 billion will include spending 84% more on the environment than the current period at £1.9 billion (up from £1 billion at AMP7) to substantially reduce phosphorous discharges from wastewater plants and addressing the 2,300 combined sewer overflows (CSOs) in its region.
Of the total expenditure, £1.9 billion will be dedicated to wastewater investment – almost doubled from AMP7. The company said spending would be focused on “where it can make the biggest difference in terms of environmental benefit”. This includes prioritising combined sewer overflows with highest potential to cause harm.
It will accelerate its metering programme, without making it compulsory for households to have one fitted. The company aims for 78% of properties to be metered by the end of AMP8, up from 51% forecast to have a meter by 2025.