Water companies are facing penalties that could see £240million returned to households and businesses through lower bills by 2030.
The regulator Ofwat has proposed hitting a raft of suppliers with payments for failing to meet targets on environmental performance and customer service.
Under the draft plans, customers would see a net £240million reduction in bills by the 2029-30 financial year, with £107million due to be returned through bills in 2027-28.
But there is a catch for households hoping for some relief from rising water costs.
The proposed reductions are likely to be offset for many customers by separate plans allowing water companies to increase bills by an extra £3.4billion, on top of an average 36% rise already agreed over the five years to 2030.
Which water companies face the biggest penalties?
Yorkshire Water and Thames Water are set to see the largest amounts taken off bills under Ofwat’s provisional plans for April 2027.
Yorkshire Water customers would benefit from £75million in underperformance payments, while £46million would be returned through bills for Thames Water customers.
However, not every supplier is facing a penalty. Some water companies are set to receive outperformance payments for meeting or exceeding their targets, with Severn Trent and Northumbrian Water seeing the largest amounts.
Ofwat said the impact on customers would depend on their supplier and circumstances.
It said changes to bills were “affected by a range of factors and the effect will vary by company and customer type”.
When will water bills change?
The proposals are not yet final. Ofwat is due to make its final decision on the so-called outcome delivery incentive payments by December 15.
Any changes will take effect from April 1 next year.
The payments are designed to hold water companies to account for their performance against agreed targets, with penalties for falling short and rewards for outperforming expectations.
For households already facing higher water bills, the proposed reductions may offer some relief – but the overall amount customers pay will also depend on other changes to charges approved by the regulator.
