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Companies unlikely to meet 2020-25 targets

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Thames Water to lose 57 mln pounds

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Ofwat CEO blames company culture

(Adds water industry body in paragraphs 11-12)

By Sarah Young

LONDON, Oct 8 (Reuters) - Britain's regulator ordered

water companies to return a total of 157.6 million pounds ($206

million) to customers after missed environmental targets, the

latest penalties slapped on an industry at the centre of a

scandal over polluting rivers.

Britain's new government came to power in July promising to

clean up the industry after sewage releases into waterways

sparked anger against the privatised companies, which are

accused of prioritising profit over infrastructure investment.

Regulator Ofwat said on Tuesday that the industry was

falling far behind a target to cut the number of sewage spills

by 30% over the 2020-25 period, with incidents only down 2%.

Water bills in 2025-26 would be reduced to reflect the

missed targets, with Ofwat saying the money would come from

shareholder returns, not investment. The country's biggest

supplier, Thames Water, will lose 57 million pounds for missing

the targets, the heaviest penalty.

Ofwat said the exact amount to be returned to customers will

be finalised in December.

It is a new financial blow for struggling Thames, which is

at the centre of the crisis in the country's water industry. It

warned in September it could run out of money in three months

unless creditors approved further borrowing.

The water companies say wet weather has resulted in a higher

level of sewage releases. They have asked the regulator to allow

bills to rise an average 33% over the next five years so they

can lift investment to improve their performance, but Ofwat

wants to cap bill rises at 21%.

Announcing the penalties, Ofwat CEO David Black said company

culture and leadership were to blame for the missed targets.

Under the performance failures, Anglian Water is set to lose

38 million pounds and Yorkshire Water 36 million pounds, while a

minority of companies including United Utilities and

Severn Trent beat targets and will receive payments

instead.

"We need to see all companies sharpen the focus on

performance and do away with the culture of blaming others and

focusing on what they can do," Black told BBC Radio, adding that

the firms should look at innovation and new technology.

Industry body Water UK, which represents the companies,

conceded performance was not what it should be but said some

improvements had been made on water leakage.

"We know there is much more to do and companies are fully

committed to boosting performance," a spokesperson said.

The companies are already facing Ofwat fines for sewage

spills over the five years to 2022. Under a package announced in

August, Thames Water, Yorkshire Water and Northumbrian Water

face penalties of 104 million pounds, 47 million pounds and 17

million pounds respectively.

($1 = 0.7641 pounds)