UK Water Companies Told to Double Compensation for Outages

(Bloomberg) -- Water companies in England and Wales will have to double their compensation to customers for providing poor service, a government ministry proposed, following a series of outages and a parasite outbreak.

Reimbursements to households for outages would rise to £50, with an additional £50 for every subsequent 12-hour period that water isn’t restored, according to the Department for Environment, Food and Rural Affairs. Compensation for internal sewage flooding would jump to a maximum of £2,000.

The measures — which include payments to customers who have to sanitize their water by boiling it, and fees for complaints not being addressed on time — are subject to an eight-week consultation period. The current compensation plan hasn’t been updated since 2000.

Water companies are already facing public anger over illegal sewage spills and chronic leaks caused by decades of under-investment in aging infrastructure. But poor customer service is making matters worse.

In May, around 16,000 homes and businesses in England’s Devon county were told to boil their water before drinking it after a parasite got into the local water supply, causing hundreds of people in South West Water Ltd.’s service area to become ill. 

That same month, more than 32,000 properties in Hastings and St. Leonards on the South East coast were left without supply due to a burst pipe owned by Southern Water. Hundreds of Thames Water customers in Surrey county were told not to drink tap water after gasoline was found in the supply following a fuel leak at a nearby filling station.

“Our water industry is broken,” said Steve Reed, secretary of state at Defra. “After years of failure, households and businesses have been let down by water companies time and time again.” 

The industry is seeking permission from government regulator Ofwat to raise customer bills by more than 35% over the next five years to fund a £100 billion investment program to upgrade its networks and tackle the growing risks of climate change. A decision is expected in December, but the regulator has already said it wants to cut back those plans.

Under Defra’s proposal, the minimum reimbursement for most violations would be £40. That represents about 10% of the current average annual customer bill, according to the Consumer Council for Water, which helped draft the plans. 

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