Thames Water is to pay £120 million back to customers following an investigation by regulator Ofwat which found the company hasn't done enough to cut the amount of leaks.

The regulator found that, due to insufficient oversight and control over the company's performance on leaks, Thames Water breached two of its legal obligations

As a result, the water and sewage firm has agreed to pay £65 million back to customers, on top of £55m in automatic penalties for missing commitments to reduce leaks - which will also be returned to customers.

This means that each of Thames Water's approximately 15 million customers will receive a rebate of £15 over the next two years. The rebate will be applied automatically to customers' bills - there's no need to claim or contact the firm.

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What are the fines?

The £120 million Thames Water have agreed to pay includes:

  • £46 million to compensate customers for under-performing on leakage across the current water regulatory period (2015-2020)
  • £12 million for under-performance on leaks during 2018/2019
  • £7 million 'ex-gratia' rebate on customers' bills in 2019/2020 in recognition of its governance failing
  • £55 million in automatic penalties Thames Water would have faced for failing to meet its targets on leaks.

Thames Water has also committed to getting its leakage performance back on track, saying it will deliver promised reduction targets by 2019/2020.

It will also make additional reductions to leaks of 15% by 2020, improve its reporting and look to do more to engage with customers on leakage issues.

"Failed its customers in tackling leakage"

Ofwat Chief Executive Rachel Fletcher said: "Thames Water failed its customers in tackling leakage and the measures we’ve announced today illustrate the scale of the company’s shortcomings and how seriously we take them.

"High leakage creates unnecessary strain on the environment, excess costs for customers and increased risk of water shortages. A well-run water company will have a good understanding of the condition of its pipes and will be able to reduce leakage over time. Ofwat has set all water companies a target of bringing down leakage by at least another 15% up to 2025 and expects further reductions beyond this date.

"Thames has assured us that they now have a grip on the leakage situation, but this should serve as a catalyst for the company to improve how it delivers on its wider commitments to customers.

"Customers don’t want to see their water company letting them down like this, but we hope the rebate they will now receive goes some way towards compensating them for their water company’s failure to live up to its commitments to cut leakage.”

Steve Robertson, Thames Water CEO, said: "Reducing leakage is really important to us and to our customers. We met our leakage targets for a decade but our recent performance has not been good enough. We let our customers down and for that we’re sorry.

"We have taken more control of how we manage the network and are investing significantly more in people and resources to tackle leakage, get back on track and then go beyond. Thanks to these changes already in place, our current leakage repair performance is our best ever at around 1,000 a week. Our focus is to restore customers’ trust and confidence in Thames Water."