Thames Water has been handed record fines totalling almost £123 million following two investigations into the company by the industry regulator.
Ofwat said Britain’s largest supplier will have to pay £104.5 million in penalties for breaking rules relating to waste water. It is the biggest fine the watchdog has ever issued.
Thames Water, which is trying to seal a takeover deal to stabilise its finances after running up a huge debt mountain, will also pay an additional penalty of £18.2 million for breaches of rules relating to dividend payments.
Ofwat said the fines have to be paid by the company and its investors, and not passed on to customers.
Ofwat said its investigation into how the company was managing its treatment works and wastewater network “uncovered failings that have amounted to a significant breach of the company’s legal obligations, which has caused an unacceptable impact on the environment and customers. “
It found that “systemic” failures had allowed hundreds of wastewater overflows at Thames Water treatment plants.
In 2021 alone more than 70% of Thames Water’s storm overflows spilled on 20 or more occasions, with almost 30% spilling on more than 60 occasions.
The investigation concluded that “Thames Water has failed to demonstrate that these spills resulted from exceptional circumstances, or that it would have been excessively costly to address the spills from these storm overflows,” which had been taking place since at least 2017.
Ofwat chief executive David Black said: “This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment.
“Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations.
“The company also failed to come up with an acceptable redress package that would have benefited the environment, so we have imposed a significant financial penalty.
"This decision provides certainty for the company for both its past failures and what we expect from the company to comply with its obligations in future. “
Mike Keil, Chief Executive of the Consumer Council for Water (CCW), said: "These failures amount to a serious betrayal of customers and the environment by Thames Water and come at a time when our research shows it is already the least trusted water company in England and Wales.
“We're pleased to see Ofwat using its new powers to block unjustified dividends, which shareholders should have to earn through the company delivering on its commitments to customers and the environment.”
“Thames Water customers are paying more than ever before for their water and sewerage services and they are impatient for improvements to the company's customer service and environmental performance."
Cat Hobbs, founder and director of campaign group We Own It, said: “This type of sanction is well overdue, but unfortunately, it's still too little too late.
“It’s all well and good slapping Thames Water with a huge fine, but this just means they’ll try and raise customer bills even higher to cover the cost.
“None of this changes the underlying problem – as long as water is privatised, we will continue to be ripped off, and rivers will continue to be polluted for profit.
“The Environment Secretary has the power to stop this madness. He can put Thames Water into special administration, slash most of the rotten debt and then transfer it to full public ownership with a new oversight board that includes billpayers, trade unions and environmental groups. Water is an essential human right. We should have the ultimate say over how it’s run.”
Environment Secretary, Steve Reed said: “The Government has launched the toughest crackdown on water companies in history.
“Last week we announced a record 81 criminal investigations have been launched into water companies. Today Ofwat announce the largest fine ever handed to a water company in history.
“The era of profiting from failure is over. The Government is cleaning up our rivers, lakes and seas for good.”
Ofwat also confirmed its decision to impose a £18.2 million penalty on Thames Water as a result of a separate investigation which found that the company had broken the rules relating to the payment of dividends.
Mr Black said: “We are clear that dividends must be linked to performance for customers and the environment. We will not stand by when companies pay undeserved dividends to their shareholders. This is the first time we have used these new powers, and this sets the standard.”
Ofwat concluded that, interim dividend payments totalling £37.5 million, made in October 2023 to its holding company, Thames Water Utilities Holdings Limited, and further dividend payments amounting to £131.3 million, made in March 2024, broke the rules.
The company can make no further dividend payments without first obtaining approval from Ofwat.
A Thames Water spokesperson said: “We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows.
“The dividends were declared following a consideration of the company’s legal and regulatory obligations. Our lenders continue to support our liquidity position and our equity raise process continues.”
