Thames Water blocked from using customer cash to pay bonuses

THAMES Water will be blocked from clawing back from customers £770,000 (S$1.3 million) in bonuses paid to its bosses last year.

The water industry regulator Ofwat said on Thursday (Nov 21) that Thames shareholders, not bill payers, should cover the bonuses paid to the utility’s chief executive and chief financial officer.

Nine companies will not be allowed to use customer money. The watchdog needed to officially block only three companies after the rest complied voluntarily. The regulator has powers to insist that bonuses of poorly performing companies are paid by owners, rather than customers.

But Thames’ current shareholders turned their back on the business in March this year, declaring it “uninvestable”.

“In stopping customers from paying for undeserved bonuses that do not properly reflect performance, we are looking to sharpen executive mindsets and push companies to improve their performance and culture of accountability,” Ofwat chief executive David Black said.

Thames is now desperately searching for new investors to provide £3.3 billion in new equity over the next five years to curb chronic leaks and sewage spills. The heavily indebted utility supplies to a quarter of England including London. Last week, it extended the deadline for indicative bids to Dec 5.

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Thames would likely be forced into temporary nationalisation without new funding and debt restructure.

The government wants to give Ofwat new powers to entirely block bonuses to chief executives and senior leadership of water companies, unless they meet high standards for protecting the environment, their consumers, financial resilience and criminal liability.

But its Water (Special Measures) Bill saw a setback in parliament on Tuesday, when members of the upper chamber voted for a Conservative Party plan that would ensure the government and parliament, not Ofwat, oversee the rules concerning water bosses’ bonuses and governance standards.

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The House of Lords also voted in favour of a new rule that would require water companies to regularly report to Ofwat on their commercial restructuring and debt levels.

Tim Farron, member of parliament, said it is “an utter disgrace” that Thames is paying out a bonus at all. 

“It is a welcome shock that Ofwat is actually acting to protect bill paying customers for once after proving completely toothless in cracking down on these polluting firms for years.” BLOOMBERG