Ofwat proposes a £240 million cut to water bills, with Thames and Yorkshire facing the largest penalties
The regulator's draft determinations for 2025-26 would return £107 million through bills in 2027-28. Yorkshire Water faces a £75 million underperformance payment and Thames Water £46 million, while Severn Trent and Northumbrian stand to gain the most for outperforming.
Ofwat has proposed cutting customers' water bills by a net £240 million after assessing how England and Wales's water companies performed against their targets in 2025-26, with Thames Water and Yorkshire Water facing the largest penalties.
The regulator published its draft Outcome Delivery Incentive determinations on Wednesday. Of the £240 million net reduction, £107 million would be returned through customer bills in 2027-28. The incentives, set at the 2024 price review, reward companies that beat their performance commitments on measures such as leakage and customer experience, and penalise those that fall short.
Yorkshire Water and Thames Water will see the largest underperformance payments applied in April 2027, at £75 million and £46 million respectively on the figures reported from the draft plans. Ofwat said Yorkshire customers could see an average of £27 taken off their bills, with a £7 reduction for Thames customers.
A draft penalty is not yet a smaller bill.British Journal analysis
Not every company loses. The largest outperformance payments will apply to Severn Trent Water and Northumbrian Water, whose customers could pay more as a result: an extra £21 a year for Northumbrian customers and £8 for Severn Trent customers on the reported figures.
Ofwat stressed that the figures are draft and that changes to bills are affected by a range of factors, so the effect will vary by company and customer type. Its final determinations are due by 15 December 2026 and will affect bills from 1 April 2027.
There is a wider caution for households. The Press Association reported that the proposed reductions could be offset for many customers by plans to allow water companies to raise annual tariffs by an extra £3.4 billion, on top of the 36 per cent average rise already agreed over the five years to 2030. A draft penalty, in other words, is not yet a smaller bill.
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