Water companies will be forced to refund overcharged customers under plans to create a consumer protection body in a shake-up of the industry.
A new ombudsman will be set up with legal powers to resolve customer disputes over leaks, incorrect bills and water supply issues.
The i Paper understands it will have the power to force water firms to refund customers who are overcharged.
It will also be able to act for customers collectively to secure compensation in situations such as the Brixham parasite outbreak, when billpayers were forced to contact South West Water individually to secure money they were owed, or after severe water outages.
Environment Secretary Steve Reed told The i Paper this would improve the current system which sees customers left “stranded with complaints about their water companies”.
The changes will bring dispute resolution processes for water in line with other utilities – like energy – and upgrade the current voluntary system of consumer protection that is thought to lack teeth.
The Department for the Environment, Food and Rural Affairs said the new watchdog would help “re-establish partnership” between water companies and consumers.
In May, a survey by the Consumer Council for Water (CCW), which will have its role expanded under the changes, found trust in water companies had reached a new low, with less than two-thirds of people saying they provided value for money.
Only 53 per cent said they thought what water companies charged was fair, even before the impact of a 26 per cent increase in bills that came into effect in April.
The ombudsman will be announced as Reed sets out plans for “root and branch reform” of the water industry, to be unveiled alongside a major review of the sector on Monday.
The key recommendation from Sir Jon Cunliffe’s Water Commission is expected to involve scrapping Ofwat and creating a new regulator, which could incorporate the work of the CCW.
Reed told The i Paper: “For too long customers have been left stranded with complaints about their water companies, unable to see resolutions to issues that matter the most.
“We are putting customers first with our reforms and on a level playing field with the water sector by creating a new Water Ombudsman.
“For the first time this will give customers a free, mandatory and binding way to manage their complaints from leaking pipes, incorrect bills or water supply issues.
“This is about holding companies to account and these changes will not just help households, but businesses will also get more support, for example in disputes over changing retailers.”
He added: “This is only one element of our ‘root and branch’ reforms to make the water sector one of growth and opportunity that serves working people.
“We will continue to do what it takes to clean up our rivers, lakes and seas for good – something this paper has successfully championed with its’ ‘Save Britain’s Rivers campaign.”
Automatic fines for illegal sewage spills
Reed is also looking at a range of other measures to crack down on water firm performance.
This includes the introduction of automatic fines for illegal sewage spills from next year, which the Government will be able to issue thanks to the introduction of independent real-time monitoring of pollution.
A further review by Ofwat or any future regulator in 2027 will meanwhile look at closing any loopholes in the Government’s ban on unfair bonuses for water companies.
Reed was on Sunday forced to urge Southern Water’s chief executive to turn down a pay rise worth hundreds of thousands of pounds, saying it was not “merited”, amid concerns that companies were trying to find a way around the ban.
Lawrence Gosden, who has led Southern Water since 2022, was awarded £691,000 as part of a long-term incentive plan this year on top of his fixed pay of £687,000, according to the company’s annual report.
It is understood that he has only received half of this payment this year, taking his total pay to more than £1 million.
Southern Water was banned from paying bonuses last month over a so-called “category 1” sewage spill in the New Forest, Hampshire, in August 2024.
Asked on Sunday about Gosden’s pay, Reed told the BBC’s Sunday With Laura Kuenssberg it was “outrageous” and implored Southern to “think about how this looks to their customers”.
A Southern Water spokesperson said its chief executive’s pay and benefits were decided by a remuneration committee “following protocols and rules set out by Ofwat and in accordance with the law”.
They added: “Lawrence Gosden’s 2025 package includes a relocation allowance, and long-term incentive plan paid by shareholders which marks improvements made during the delivery of our turnaround plan. Both of these payments represent common industry practice.”
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