Committee publication · Correspondence · 10 June 2025
Correspondence from Susan Davy, CEO, Pennon Group, regarding Reforming the water sector inquiry, dated 3 June 2025
From: Environment, Food and Rural Affairs Committee
Inquiry: Reforming the water sector
Summary
Susan Davy, CEO of Pennon Group, responds to the EFRA Committee's questions on water sector reform. The letter outlines Pennon's governance structure, dividend policies, remuneration frameworks, and programmes addressing water poverty and data transparency. Davy emphasises responsible stewardship, £530m equity injections into water businesses over five years against £202m in dividends paid, and a £200m commitment to eliminate water poverty by 2030.
Key findings
- Pennon has injected £530 million in equity into water businesses since 2020 while receiving £202 million in dividends—a net £330 million investment; dividend payments restricted in two of five years.
- Remuneration policy shifted significantly toward long-term incentive schemes with 90% of FY25 bonuses tied to water company performance; executives hold 200% of annual salary in shares with malus and clawback provisions.
- Water businesses have not incurred legal costs initiating action against regulators (Ofwat, Environment Agency, Drinking Water Inspectorate) over five years; advertising spend focused on customer awareness, not brand promotion.
- Pennon eliminated water poverty for over 150,000 households during AMP7 with £124 million support; commits £200 million in AMP8 (2025-2030) with tariff innovation trials showing 1.9% average water use reduction.
- Asset replacement rates increasing for AMP8: water mains renewal moving to 0.3-0.6% annually (from 0.11-0.21% in AMP7); 100% Combined Sewer Overflow monitoring achieved, monthly data published.
Tone
SupportiveTopics
Key actors
Susan Davy, Pennon Group Plc, Alistair Carmichael MP, Environment, Food and Rural Affairs Committee, South West Water, Sutton and East Surrey Water, Ofwat, Environment Agency
Notable line
“… we have injected twice as much equity into the water businesses as taken in the form of dividends over the last 5 years.”
Key Quotes
“We appreciate the Committee's efforts to gain a comprehensive, cross-industry understanding of the issues at hand.”
“This strategy has brought financial resilience to customers and communities. Since 2020, we have acquired water businesses (Bristol Water, and the Isles of Scilly), merging their licences into the existing South West Water licence”
“… over the past five years, Pennon Group plc has provided additional equity into the regulated water businesses it owns of over £530 million; whilst those regulated water businesses have paid dividends of £202 million to Pennon Group plc, as their sole shareholder.”
“We do recognise that cash bonuses are problematic in the sector and have also taken a responsible approach in not taking bonuses when it has been right to do so.”
“We are proud to be the only water company to have eliminated water poverty during AMP7, supporting over 150,000 households and delivering £124 million in targeted assistance.”
“Our water companies have not incurred any legal actions against regulators over the past 5 years.”
“We believe that open access to accurate, timely data empowers customers, campaigners, and communities to make informed decisions, hold us accountable and as a listed business, transparency is at our core.”
Source · parliament.uk record ↗