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Thames Water scraps smart meter project after missing leakage targets

Thames Water
Thames Water

Thames Water has been forced to scrap a flagship programme to roll out more than 200,000 smart meters in the South East after the troubled supplier missed leakage targets.

The utility giant said it will cancel the project after missing out on £72m of funding from the regulator Ofwat, which was contingent on it hitting performance goals.

Its cancellation marks the latest blow for the business, which on Tuesday revealed that debts rose to £14.7bn and profits fell by 54pc to £246.4m in the six months to September compared with a year ago.

Thames Water bosses have now been summoned by MPs on the Environment, Food and Rural Affairs Select Committee to address concerns over the company’s finances.


The smart meter plan formed part of the supplier’s so-called Green Economic Recovery (GER) programme, which aimed to install 204,700 devices across the Thames Valley region by 2025.

Earlier this year, Thames said it was yet to install any of the targeted 204,000 but had already spent more than £1m on “preparatory work”.

The company said on Tuesday it had been left with “no alternative” to end the programme after missing out on Ofwat’s funding.

A Thames Water spokesman said: “We’re disappointed in Ofwat’s decision, which we don’t believe is in the best interests of our customers or the environment. South East England is a water-stressed region and we need to act now to protect water resources.

“Smart meters are critical in helping us to reduce and identify leaks and meet the unprecedented demand for water, while giving customers greater control over their water use and bills.”

Thames Water planned to pay for the smart meter roll-out using money from a £2.7bn funding scheme set up by Ofwat to support industry investment in green projects. The scheme is designed to allow suppliers to reclaim the cash through household bills.

Around £72m was set aside for Thames Water’s flagship smart meter strategy, although this depended on the supplier meeting strict conditions that have not been met, the Water Report first reported.

This included targets to reduce leaks, which hit a five-year high earlier this year.

The spokesman added: “This bid was approved by Ofwat and our ability to recover the £72m allowance was conditional on us delivering at least 98pc of our leakage performance commitment between the 2020-2025 period.

“While we met our leakage target in years one and two, the impact of drought and freeze-thaw events over the last year meant we fell short of our year three target.”

Ofwat declined to comment.

The Telegraph revealed in August that the company was trying to doorstep unsuspecting customers to install devices.

This came after the supplier was permitted to install devices without notifying households as part of the Government’s attempts to reduce household water usage.

Last year, a bedridden 98-year-old woman was sent a bill stating she had used the equivalent of 1m cups of tea in six months.

This led to her monthly payments to Thames Water jumping from £33 to £215. The supplier, which has vowed to install up to 2 million smart meters by 2030, later apologised for the error.

The meters work in much the same way as digital electricity and gas smart meters, sending readings to the supplier every hour.

Thames Water’s funding shortfall for smart meters forms part of a broader deficit across the business as it scrambles to raise £750m from shareholders, including the China Investment Corporation and Abu Dhabi’s sovereign wealth fund.

The company has already announced plans to hike customers’ average bills by 40pc by 2029/30 in a bid to raise cash.

Interim co-chief executives Cathryn Ross and Alastair Cochran said on Tuesday that Thames’ turnaround “will take time”.

Ms Ross and Mr Cochran said: “We simply cannot do everything that our customers and stakeholders wish to see at a pace and for a price that everyone would like.”