Thames Water has been ordered to pay out £120m to compensate customers over poor management of leaks.
An investigation by regulator Ofwat found the company “failed its customers” as it breached two of its legal responsibilities.
The watchdog found its management “did not pay enough attention” to solving leakage issues and “underestimated the significance of its underperformance”.
Thames Water said its focus was now on restoring customer trust.
Thames Water chief executive Steve Robertson said the company “met its leakage targets for a decade” but added its recent performance “has not been good enough”.
“We let our customers down and for that we’re sorry,” he added.
The company has been fined £55m for missing its commitment to customers to cut leaks. It has agreed to pay back a further £65m to customers following the investigation.
That total will be returned through a rebate of about £15 to each customer over the next two years.
Ofwat chief executive Rachel Fletcher said the penalties illustrated “the scale of the company’s shortcomings”.
“Thames has assured us that they now have a grip on the leakage situation, but this should serve as a catalyst for the company to improve how it delivers on its wider commitments to customers,” she added.
“Customers don’t want to see their water company letting them down like this.”
Ofwat said Thames Water also committed to bringing its leakage performance back in line with what it had promised to deliver for 2019-20.
Ms Fletcher said high leakage created an “unnecessary strain on the environment, excess costs for customers and increased risk of water shortages”.
“A well-run water company will have a good understanding of the condition of its pipes and will be able to reduce leakage over time”, she added.
How do the leaks happen?
- Many leaks are caused by Victorian-era iron pipes degrading and moving, which allows water to escape
- Leaks can be located using acoustic technology, as changes in sound often indicate a change in water levels
- Thames Water is spending £97m on top of £145m already invested to fix leaks across 31,000km of pipes
- 2.5bn litres of water runs daily throughout London and Thames Valley