(Bloomberg) -- Thames Water will be blocked from clawing back from customers £770,000 ($973,670) in bonuses paid to its bosses last year.
Regulator Ofwat said shareholders, not bill payers, should cover the bonuses paid to Thames’ chief executive and chief financial officer. The announcement shows the watchdog is using new enforcement powers, yet it has also delayed a decision on whether to fine Thames for paying dividends during the past year.
In total, nine companies won’t be allowed to use customer money to fund bonuses, but Ofwat only needed to officially block three after the rest complied voluntarily.
“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 CEO David Black said in a statement Thursday.
Shareholders at Thames, the heavily indebted utility which supplies a quarter of England, turned their back on the business in March this year, declaring it “uninvestible.” The firm 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. Last week, it extended the deadline for indicative bids to Dec. 5, Bloomberg reported Monday.
Without new funding and a debt restructure, Thames would likely be forced into temporary nationalization.
The watchdog has also been investigating whether the firm broke rules by paying dividends to its parent company while it was leaking water and spilling sewage.
A decision on the fine will come later this year, according to a person familiar with the situation, who asked not to be named because the information is private.
The government wants to give Ofwat powers to entirely block bonuses to CEOs and senior leadership 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 plan that would ensure the government and parliament — not Ofwat — oversee the rules concerning bosses’ bonuses and governance standards.
The House of Lords also voted in favor of a new rule that would require water companies to regularly report to Ofwat on their commercial restructuring and debt levels.
Tim Farron MP, Liberal Democrat environment spokesperson, said it’s “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.”
The three companies which Ofwat took intervening action against are:
Thames Water CEO and CFO payments: £770,000
Yorkshire Water CEO and CFO payments: £616,000
Dŵr Cymru Welsh Water CEO and CFO payments: £163,000
(Updates with delay to dividend decision in second paragraph.)
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