Regulator Ofwat has informed Severn Trent, an FTSE 100 water company that it can add £38.4m to customers’ bills after it exceeded targets in decreasing sewer flooding and other areas.
The group, which is worth £4.9bn, will get £11.4m of the payment in the 2018/19 period, meaning that it can add an average of £2.16 to customer bills, and the rest in succeeding years.
The decision was defended by Ofwat, saying that it encouraged better performance from all companies and was awarded for going “above and beyond” performance targets.
Severn Trent, which has over 4.2 million customers in mid-Wales and the Midlands, reported a pre-tax profit amounting to £336m and revenue of £1.82bn for the year to the end of March.
Chief executive Liv Garfield was paid £2.45m.
Ofwat also published an underperformance penalty amounting to £2.09m for South West Water, which will result in £3.43 coming off the bills of customers in 2018.
South West Water, which serves around 1.7 million customers in Devon, Cornwall, and parts of Somerset and Dorset, has underperformed on incidents of pollution over the last two years.
Anglian Water, which has lessened leakage levels, is reported to receive an outperformance payment amounting to £2.6m. The company serves 4.3 million customers along a large area of eastern England.
Other water companies that are receiving outperformance payments or under-performance penalties have decided to have them combined and applied once Ofwat carries out its next price review in 2019 when it establishes service performance and targets for the period of 2020-2025.
Cathryn Ross, the Ofwat chief executive, stated: “Under our framework, what customers pay reflects how their water companies perform, ensuring that companies have their attention fixed firmly on delivering the things that matter most to their customers.
“For companies that go above and beyond, setting new standards across the sector, there will be hard-earned payments; companies that fail to perform will face stiff penalties.”