Investors in Thames Water, Yorkshire Water and Dul Cymru Welsh Water will be given executive bonuses after the water regulator ruled the sector had made “unwarranted” additional payments worth £6.8 million. will be forced to pay.
Ofwat announced on Thursday that it had exercised new powers to make bonus payments to shareholders and bondholders of the three companies because they “do not adequately reflect the company's overall performance issues.”
Water companies have faced a wave of public anger and political backlash over leaks and sewage overflows in recent years, and their financial burdens have increased.
Nine water companies will not be allowed to use customer funds to pay out bonuses worth £6.8 million. Six companies said their shareholders would pay voluntarily, but Ofwat had to use its powers directly over £1.5 million worth of bonuses from Thames, Yorkshire and Wales.
Mr Ofwat said Thames City, which is trying to agree an emergency funding package worth £3bn, paid bonuses worth £770,000 to its chief executive and chief financial officer without giving any justification. It is said that he tried to do so.
Thames chief executive Chris Weston, who joined the company in January, was given a £195,000 bonus in his first few months on the job, according to the company's annual report.
Yorkshire's bonus payout was £616,000, including £321,000 to chief executive Nicola Shaw, while Wales' bonus payout was £163,000, including £91,000 to boss Peter Perry. It was a pound.
Separately, Ofwat said there were “growing concerns” about the financial resilience of South Staffs Water and Wessex Water. Thames, South East and Southern Rivers remained the least resilient water companies. Underscoring the current state of the industry, 10 out of 16 water companies in England and Wales are on Ofwat's financial watch list.
The new bonus rules were proposed last year under the Conservative government. Ofwat, which regulates water companies in England and Wales, can currently only pass the burden on to shareholders and bondholders, but legislation going through Parliament will give it new powers to block bonuses altogether.
David Black, chief executive of Ofwat, said: “To stop customers paying unfair bonuses that don’t properly reflect performance, we want to sharpen management thinking and encourage companies to improve their culture of performance and accountability. ”
“While companies are beginning to take positive steps, more needs to be done to rebuild public trust.”
The bonus will be recovered by Ofwat reducing the amount the three companies can charge on household and business water bills.
The move comes as Thames seeks to raise from new equity investors on top of £3bn in emergency bond funding, as current shareholders say they have no intention of putting in any more money. This would effectively add to the £3.25 billion. Alastair Cochrane, Weston and Thames' finance director, has already received his bonus.
Yorkshire's costs will be borne by investors in Hong Kong and Singapore, while Welsh Water, which is controlled by the Welsh Government, is funded by bondholders.
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Other companies that agreed to use shareholder funds to pay executive bonuses were Anglian, Severn Trent, South West, Southern, United Utilities and Wessex.
Mr Ofwat said the companies that paid the most “unfair” bonuses were United Utilities' £1.4m and Severn Trent's £2.6m. However, because the bonuses were paid by the holding company rather than a regulated subsidiary, they were exempt from enforcement action.
James Wallace, chief executive of anti-pollution campaign group River Action, said: “Ofwat said it was time for water company chief executives to stop lining their own pockets at the expense of struggling ratepayers. ” he said. Confronting the corporate greed plaguing water companies that have consistently failed to protect our rivers, oceans and lakes is long overdue. ”
Households will not have to pay the bonus directly, but bills will rise when Ofwat makes a final decision next month on which businesses can charge customers over the next five years.
Liberal Democrat environment spokesman Tim Farron said bonuses to water companies should be completely banned while sewage pollution continues. He said the regulator was “completely unfit for purpose”.
“Customers are forced to watch dirty sewage destroy their local environment while paying through the nose for their pleasure,” he added.
