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The water regulator has identified six water companies which, it says, are “falling short” in “too many areas” including sewage discharge.
Ofwat said it was “deeply concerned” that Northumbrian Water, Southern Water, South West Water, Thames Water, Welsh Water and Yorkshire Water were lagging behind expectations.
Its annual assessment of company operational performance and financial resilience singled out industry wide failures in areas including pollution which, Ofwat said, had increased.
The report was released against the backdrop of a backlash against water firms over sewage overflows which forced beaches to be closed in some instances earlier this year.
The six firms called out by the watchdog have to explain their performance and present a clear action plan.
Most had “again failed to clearly explain the link between their dividend decisions and payments with performance delivery for customers”, Ofwat said.
It added: “In particular, both Northumbrian Water and Portsmouth Water fell short of our expectations when considered in the context of the level of dividend they paid, which was significantly higher than our base expectations, and their relative financial resilience.”
The report said there has been encouraging progress on leakage, which is now at its lowest level since privatisation.
However, the number of serious pollution incidents increased, with Ofwat revealing earlier this week that water firms are failing to invest as much as they promised to fix their networks, including improving sewage treatment and reducing spills into the environment.
Between 2020 and 2022, 14 companies underspent their budget on improving their water network and eight companies underspent their budget for improving their wastewater network.
Affinity Water and Northumbrian Water spent just 47% and 48% of their water enhancement allowance respectively, and Yorkshire Water and South West Water spent just 20% and 39% of their wastewater enhancement allowance…
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