Thames Water fined £18m over dividends but granted 35% bills hike by 2030
The ruling falls well short of a 59% bills hike requested by the troubled water company, as it tries to secure a bailout from investors.
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Your support makes all the difference.Thames Water is to be allowed to hike consumer bills by 35% by 2030 following a decision by the industry regulator, as it was also handed an £18.2 million fine for paying “unjustified” dividends to shareholders.
The average annual bill will rise to £588 by 2030, Ofwat said, £152 more than current levels of £436 a year.
Ofwat said the lion’s share of that increase, about £108 of the £152, will come in the 2025-2026 financial year.
The ruling falls well short of the 59% Thames Water had said it needed in the run-up to the decision, as the embattled water company tries to negotiate a bailout.
We will take action against companies who take money out of these businesses, where performance does not merit it
The company, which serves about 16 million people in London and the South East, is in the grip of a funding crisis and needs a £3 billion loan from creditors to keep operating beyond March.
Ofwat said the £18.2 million fine was for paying £158.3 million in dividends to shareholders which it said were not justified.
The regulator said it will claw back £131.3 million of the payments so it does not come out of customer bills.
Ofwat chief executive David Black said the penalty was “a clear warning to the whole sector”.
He added: “We will take action against companies who take money out of these businesses, where performance does not merit it.”
Thames Water is in more than £16 billion-worth of debt, and earlier this week held the first of several high court hearings over its proposed £3 billion bailout.
The cluster of investment firms that drew up the deal – including BlackRock, Abrdn and M&G – have said they need a sizeable increase in bills to make it happen.
It is unclear whether the 35% bills hike will be deemed enough for the bailout to go through, after the investors had also been in talks with Ofwat in recent weeks.
Thames Water said earlier this year that failing to grant it the bills hike it asked for “would also prevent the turnaround and recovery of the company”.
Bosses now have the option to refer Ofwat’s decision to the Competition and Markets Authority.
That would kick off a fresh process which could see consumers wait months more to find out how much they will have to pay over the coming years.
If it does not get the £3 billion bailout, Thames Water is likely to fall into public hands via a Government-handled administration, which could be costly for the taxpayer.
Thames Water said it will tell customers how much more they will pay next year by early February.
Ofwat said the steep hike in bills would allow Thames Water to spend £20.5 billion on improving its network of pipes, sewers and drains over the next five years.
The regulator set the company a target of reducing spills from storm overflows by 29% and reducing pollution incidents by 30%.
The utility firm said that the “deliverability and investability” of Ofwat’s decision to allow bills to rise is “critical to the company’s future”.
“Given its importance and complexity, Thames Water will take time to review the determination in detail before making its response.
“The company will set out by early February the charges for customers that will apply from April 2025.
“These charges will reflect Ofwat’s final determination, and Thames Water remains committed to supporting those customers who need help with their bills.”
The company said bosses “remain focused on maintaining the stability of the business” as it seeks a £3 billion loan bailout from investors.