Ofwat to rebate £240 million to customers as water firms face penalties

The water watchdog has outlined a plan to levy penalties on firms that fail to meet 2025-26 environmental and customer-service targets, with the collected funds being rebated to consumers through lower bills. The draft scheme forecasts a total net bill reduction of £240 million by 2029-30, including £107 million returned in the 2027-28 financial year. Concurrently, Ofwat will allow water companies to raise annual tariffs by an extra £3.4 billion, adding to the 36% average increase already set for the 2025-2030 period.

Yorkshire Water and Thames Water are expected to see the biggest underperformance deductions in April 2027, at £75 million and £46 million respectively, while Severn Trent and Northumbrian Water may earn outperformance payments. Ofwat notes that the impact on bills will vary by company and customer type. The regulator will finalize the outcome delivery incentive payments by 15 December, with changes taking effect from 1 April next year. Prime Minister Andy Burnham has also signalled a push toward public ownership of struggling water firms.