Severn Trent may soon be able to charge nearly 5m customers a total of an extra £60m on their water bills as a reward for exceeding their own customer service targets.
The FTSE 100-listed water company told investors on Wednesday it was on track to win the multi-million dollar prize this year through the water regulator’s incentive scheme.
Ofwat’s scheme allows water companies to charge higher bills to households as a reward for exceeding their performance targets, but requires discounts for customers if the water companies fail to comply.
Severn Trent is likely to collect the bounty from its 4.8 million customers, located in Birmingham and the wider Midlands region, over several years to avoid a sudden change in bills.
The company said it expected to earn “at least” £50m for its “industry-leading performance” for clients. The pre-tax sum is calculated at 2017-18 prices, which today would mean a windfall of over £62m or almost £13 per customer.
Midlands households and businesses could see a modest increase in their bills from next April to reward the water company for exceeding targets, which include limiting sewer blockages and “inspiring our customers to use fresh water.” intelligent way”.
Ofwat is expected to review the data from the water company before making a final decision on whether it met its targets in November. Their findings would then determine bills beginning in April 2024. While water companies may be allowed to claim more money from customers as a result of the review, they can also choose not to.
Severn Trent’s expected financial bonus arose as water companies face heavy criticism for failing to meet environmental standards when monitoring major sewage overflows and pollution of major rivers.
Liv Garfield, chief executive of Severn Trent, said the company had had “a good start to the year” in delivering the return its customers and investors had come to expect.
Garfield is one of the highest paid bosses in the water sector after her salary increased to £3.9m last year, or 28 times the average for Severn Trent employees. Pirc, which advises shareholders on how to vote at annual meetings, called for a vote against her “excessive” salary. More than 95% of the shareholders supported the company’s remuneration policy.
Severn Trent investors have also enjoyed higher returns in the past year. The company increased its dividend to more than £260m last year, from £255m a year earlier, despite growing public anger over payments made by water providers to their shareholders and executives.
“We recognize that we can do more, and we are committed to going further, faster, to deliver the best possible results for our customers and the environment,” Garfield said. “The company is well positioned to make the necessary progress with a highly engaged workforce, sustained operational leadership and a strong balance sheet, which supports future investment.”
Severn Trent told investors it had become the first water company to achieve a top rating from the Environment Agency for four consecutive years. It also scrapped a hose ban for its customers this summer after managing to fill its reservoirs to almost 77%, more than 10% more than this time last year.