Ofwat sets the budgets for how much companies can invest over the price control period, to maintain and improve its water network as part of its price review.
As part of a review into water and wastewater companies performance, the regulator found that 14 companies did not spend all of their budget for improving their water network.
It also found that eight companies underspent their budget for improving their wastewater network.
Yorkshire Water spent just 20% of its wastewater enhancement allowance and Affinity Water spent just 47% of its water enhancement allowance, according to Ofwat.
The main areas of underspend across both categories included drought resilience, improvements to sewage treatment works, improvements to storm tank capacity and reducing spill frequency.
According to the Environment Agency (EA), sewage has been dumped into the ocean and rivers around the UK more than 770,000 times over the course of 2020 and 2021. This is the equivalent of almost 6 million hours. The office of environmental protection is currently investigating the role of Ofwat, the EA, and DEFRA in regulating, monitoring and enforcing water companies’ own duties to manage sewage.
David Black, chief executive of Ofwat, said: "We expect companies to deliver the service improvements they were funded to deliver. No ifs, no buts.
“The lack of investment from companies we're seeing at the moment is extremely disappointing, especially in light of the poor performance for customers and the environment. Failure to invest or delays to investments means that vital improvements are not being made or are late. I am expecting these companies to get a grip on their investment programme and make up for the shortfalls to deliver the associated improvements in service.”
Ofwat's Water Company Performance report, formerly the Service Delivery Report, will be published in full on 8 December 2022.
The water companies that responded to ENDS request for comment highlighted that this underspending is due to the investment cycle running until 2025.
An Affinity Water spokesperson said: “We are half-way through our five-year investment cycle to 2025, where we have spent just under half of the planned five-year investment.
“Rest assured, we will spend all of the planned investment for the remaining years of this five year cycle. These investments are already having a positive impact on the service we provide and the communities we serve.”
The company said it is “on track” to deliver on its 20% leak reduction target, has maintained high standards of water quality and their campaign Save Our Streams helped save over a billion litres of water in 2021/22 alongside metering.
A spokesperson from Yorkshire Water said: “We are committed to spending all our allowance on improving the environment in Yorkshire. The current investment plan runs over a five-year period to 2025 and during this time we’ll invest almost £1bn to improve river quality in our region.
“The latest performance report covers just two years of the current five-year period, where we have devoted time to designing better environmental catchment solutions than the traditional engineered solutions that will improve the environment while providing the best value for our customers. In the coming years, these solutions will be implemented and our investment will be achieved by the end of 2025, as agreed with Ofwat.”