No leakage fine for Thames Water

Thames Water has escaped being fined by regulator Ofwat for failing to meet its targets on leakage reduction.

However, Ofwat has ordered the firm to invest a further £150 million in order to reduce leaks.

Thames Water had been facing the prospect of being fined £140 million.

The news is likely to lead to criticism of Thames Water. The form, which is owned by German company RWE, reported profits of £346 million - an increase of nearly a third.

However, the company loses 894 million litres of water a day and has missed its target on leakage reduction for the third year in a row.

Philip Fletcher, Chairman of Ofwat, said: "Thames Water's failure on leakage is unacceptable. Thames has bound itself to spend an extra £150 million, at the cost of its own shareholders, to replace more ageing pipes than planned. This will directly address the issue of London leakage and achieve more secure supplies. It is more than double the maximum possible fine which the regulator could have imposed."

Environment Minister Ian Pearson welcomed the decision. He said: "It is right that the consumer does not bear the burden of the increased investment needed for Thames Water to deal with its failure to meet its leakage targets.

"£150 million of additional investment in replacing leaking mains - more than double the maximum imposable fine - which comes from the shareholder and not the bill payer, added to a more stringent leakage target by the end of the review period - 2010 - stands squarely behind those principles."

Commenting on the decision, Dame Yve Buckland, Chair of the Consumer Council for Water, said: "Thames has been in danger of eroding the consumer confidence and goodwill that it will need from consumers when asking them to save water this summer - we hope that Ofwat's action will now concentrate their minds on delivering secure supplies of water and value for money to customers. We will keep a very close watch on the company's progress as they deliver on today's legally binding agreement."

Thames Water has also applied for a drought order and expects to hear in August whether it has been granted.


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