Water bills across England and Wales could be reduced by a net £240 million under draft calculations for companies’ performance in 2025-26. Ofwat’s proposals include £107 million to be returned through bills in 2027-28, with the largest underperformance adjustments falling on Yorkshire Water and Thames Water.
The figures are not final. The regulator has opened a consultation on how the companies’ price controls should be adjusted after the first year of the current five-year period. It expects to publish final determinations by 15 December, with approved changes affecting bills from 1 April 2027.
Yorkshire Water faces largest proposed adjustment
Yorkshire Water’s draft determination includes a £75.1 million net return to customers for missing performance commitments. The estimated average bill reduction is about £27, although that is not a guaranteed saving for each household. Actual bills vary by company and customer type, and the adjustments sit alongside other factors that affect what customers pay.
Thames Water is also among the companies facing the largest underperformance payments, with a proposed £45.8 million return. The draft figures differ between providers because each is assessed against its own commitments and results for the 2025-26 charging year. They do not represent an across-the-board bill cut of the same amount.
Across the sector, the proposed net reduction combines the amounts companies would return after falling short of targets with rewards linked to outperformance. Some providers are therefore expected to receive incentive payments, which can increase bills. The £240 million net figure reflects the balance of proposed adjustments, rather than a single charge or refund applied equally to all customers.
How performance incentives work
Outcome Delivery Incentives, or ODIs, attach financial consequences to many of the service commitments set for water companies. These commitments cover areas such as leakage and customer and business experience. When a company performs below an agreed level, it can face an underperformance payment. Better-than-target performance can qualify for a reward.
The draft determinations consolidate companies’ reports of their performance against those commitments. They translate those results into proposed adjustments to price controls for 2025-30. The calculations are a regulatory assessment of performance against defined measures, rather than an assessment of every aspect of service quality or a guarantee that a particular household will receive a specific amount.
Companies and other interested parties can respond to the consultation by 5 November. The final decisions may confirm or change the proposed adjustments after consideration of those responses. Until that process is complete, the figures remain provisional and should not be treated as settled bill amounts.
The proposals arrive against a broader programme of investment in water services. At the 2024 price review, Ofwat allowed an initial £104 billion for upgrades intended to improve services and address pressures on rivers, lakes and seas. The incentive adjustments are separate from the question of whether companies deliver that investment: they are linked to performance commitments assessed for the year that ended in March 2026.
The regulator says bills will vary by company and customer type, and the draft adjustment is only one part of the calculation. The December determinations will settle the allowed-revenue changes. Customers should therefore regard the proposed £27 average reduction for Yorkshire Water as an estimate, not a promised individual reduction or a final outcome.
