Polluting water firms to be forced to cut bills if large bonuses paid to bosses
Water companies will be forced to take money off bills if they pay out large bonuses to bosses while harming the environment, under plans by the regulator.
Water companies paid out £14.7 million in bonuses, benefits and incentives last year, despite their records on pollution hitting new lows.
Under proposed new rules, companies will still be able to make payouts - but Ofwat, the regulator, will assess whether they match performance, including on the environment.
If it deems payouts should not have been made, water companies will be ordered to cut customers’ bills so that households are not paying for bonuses. Average bills could still rise, to reflect other pressures including the need to fund new infrastructure.
Emma Clancy, chief executive of the Consumer Council for Water, said the rule change would need to make a “clear difference” for customers.
“Customers don’t want chief executives to be rewarded for failure, so we look forward to examining the detail of Ofwat’s proposals on bonuses,” she said.
“Our research shows that people want to see evidence bonuses have been earned by companies delivering on commitments to their customers and the environment.
“People also want far greater transparency on pay. We want chief executives to explain to their customers – who are not able to switch supplier – why their salaries are justified.”
Water firms being made 'more accountable'
Ofwat is now consulting on how the new rules will work.
David Black, its chief executive, said: “In too many cases, bonuses paid do not reflect the reality of company performance.
“Customer trust is damaged when executive bonuses are not aligned to water company performance for customers and the environment.
“We said that if companies did not address this we would take action, and that is exactly what we are doing.
“Alongside our new rules on dividend payments, this is part of our ongoing work to make companies more accountable for their actions.”
Earlier this month, Ofwat announced new licence conditions prohibiting water companies from paying dividends to investors if their financial resilience is at risk.
The regulator has been criticised in recent weeks for not doing enough to stop water companies releasing sewage into rivers and beaches, or cracking down on leaks.
In a decision last October, Ofwat forced 11 of 17 water companies to cut their bills by a total of £150 million after they missed targets on sewage pollution and flooding people’s homes.
Responding to the Ofwat announcement, Sir Ed Davey, leader of the Liberal Democrats, said: "This is pathetic. The Government should ban all water company exec bonuses today. Instead, we have a weak regulator calling on feeble committees to consider reducing bonuses. What a complete farce.
"Water company execs pocket millions in bonuses every year while pumping our rivers and beaches full of disgusting sewage. They are raking in the cash while the British public is left to swim in filth. Frankly, the whole thing stinks."