Thames Water will have to knock around £100 million off customer bills after regulator Ofwat found it, and a number of other water companies, had failed to reach industry standards.
The fine for Thames, which was the largest issued today, came as part of a £114 million rebate package for customers unveiled by Ofwat.
It was followed by Southern Water, which must pay out £43 million, while Anglian Water will have to return around £22 million to its customers.
Some companies were rewarded for better performance with Severn Trent Water taking £88 million and United Utilities taking £25 million, as part of the overall total.
David Black, Ofwat CEO, said water companies were “falling short”, leading to £114 million being returned to customers through bill reductions.
While that may be welcome to billpayers, "it is very disappointing news for all who want to see the sector do better”, he added.
Ofwat said the rebate, which followed its assessment of performance against targets set for 2022-23, will come off customers' bills for next year.
The industry regulator’s decision comes as it publishes its annual Water Company Performance Report, which categorises companies' performance as 'leading' 'average' or 'lagging'.
This year, no company has been ranked in the 'leading' category.
Ten companies are in the 'average' category and seven have been categorised as 'lagging' (Anglian Water, Dŵr Cymru, Southern Water, Thames Water, Yorkshire Water, Bristol Water and South East Water).
Ofwat said some improvements had been made on leakage and internal sewer flooding but progress has been too slow.
“In 2022-23, fewer than half of companies achieved their performance target on reducing pollution incidents and fewer than half of the companies met their performance commitment on leakage,” it said.
“This performance is matched by an overall decline in customer satisfaction during the past year,” it added.
In addition, Ofwat also reported that most companies have not fully invested their 2020-2023 allowed funding for delivering service enhancements.