Regulator Ofwat has told FTSE 100 water company Severn Trent it can add £38.4m to customers’ bills after it outperformed targets in reducing sewer flooding and other areas.
The group, which is worth £4.9bn, will take £11.4m of the payment in the 2018/19 period, meaning it can add an average £2.16 to customer bills, and the rest in subsequent years.
Ofwat defended the decision, saying it encouraged better performance from all companies and was awarded for going “above and beyond” performance targets.
Severn Trent, which has more than 4.2 million customers in the Midlands and mid-Wales, reported a pre-tax profit of £336m and revenue of £1.82bn for the year to the end of March.
Chief executive Liv Garfield was paid £2.45m.
Ofwat also announced an underperformance penalty of £2.09m for South West Water, which will result in £3.43 coming off customers’ bills next year.
South West Water, which serves about 1.7 million customers in Cornwall, Devon, and parts of Dorset and Somerset, has underperformed on pollution incidents over the last two years.
Anglian Water, which has reduced leakage levels, is to receive an outperformance payment of £2.6m. It serves 4.3 million customers along a large stretch of eastern England.
Other water companies receiving outperformance payments or under-performance penalties have chosen to have them combined and applied when Ofwat carries out its next price review in 2019, when it sets service performance and targets for the 2020-2025 period.
Ofwat chief executive Cathryn Ross said: “Under our framework, what customers pay reflects how their water companies perform, ensuring that companies have their attention fixed firmly on delivering the things that matter most to their customers.
“For companies that go above and beyond, setting new standards across the sector there will be hard-earned payments; companies that fail to perform will face stiff penalties.”