Yorkshire Water has been ordered to return £75m to customers via lower bills next year after missing key targets on pollution and leaks.
Water watchdog Ofwat is proposing to hit a raft of firms with a total of £107m penalties for not meeting targets on environmental and customer service in the 2025-26 financial year.
Yorkshire Water is set pay by far the most in underperformance payments, out of a total of 15 English and Welsh water companies.
It comes as the firm is set to be downgraded to the lowest possible one-star rating by the Environment Agency after the number of pollution incidents rose by 72% in 12 months - up from a total of 151 in March 2025 to 260 in April 2026.
Ofwat estimates that it will reduce the average Yorkshire Water bill – which rose to £636 in April – by £27.
However cuts to bills are likely to be offset by a 41 per cent rise already agreed over the five years to 2030.
Scarborough’s Steve Crawford, from Surfers Against Sewage, says Yorkshire Water should make separate payments of £27 to customers, either by cheque or digitally, so it is not lost "in a sea of figures".
“We want our £27 back in some shape or form that we can see,” he said.
Freddie Drabble, leader of campaign group Sons of Neptune, said the £75m should come out of the company’s profits.
“It is really the shareholders who should be suffering from this. If you invest you have to take the bad times,” he said.
One-star rated Thames Water, which has been hit with the second highest amount of penalties, will have to return £45m to customers.
In contrast Severn Trent and Northumbrian Water will get reward payments because they met their targets – covered by higher bills.
Ofwat will make its final decision on so-called outcome delivery incentive payments by December 15, which will take effect on bills from April 1 next year.
Yorkshire Water said the £27 would be “factored into next year’s water charges”, and customers would be informed once these had been confirmed.
A company spokesperson said: "We recognise that our performance last year fell short of the standards we and our customers expect in some areas, and we remain focused on improving.
"We are already delivering Yorkshire's largest ever environmental investment programme and with the help of over 1,000 new colleagues, we’ve completed improvements at almost 300 locations across the county.
"While major infrastructure investment takes time to translate into improved performance, this work is helping to build a stronger, more resilient network for the future.”
Ofwat is set to be replaced by one single water regulator responsible for the entire water system.
A government spokesperson said: "We will deliver a strengthened Water Bill that puts people first, ensuring affordable access to clean water, driving down pollution, and strengthening public control."