Water companies have been ordered to return £158m to households as they were rebuked over their poor performance.

Customers will see a reduction in their water bills in 2025/26 as a result, the watchdog said.

Ofwat warned that its assessment of the sector released on Tuesday was “disappointing”, and suppliers had fallen further behind on key targets on issues like pollution.

It comes after water companies’ sewage spills into English rivers and seas more than doubled last year, adding to growing public outrage over the privatised utilities sector.

The watchdog said that record investment alone over the next five-year period would not be enough to restore public trust.

Ofwat chief executive David Black warned that water companies kept blaming “outside causes” rather than recognising their shortcomings.

He told the BBC’s Today Programme: “In our work with water companies, we continually find that they tend to blame outside causes like the weather, the area that they serve or even their customers rather than focusing on the root causes of what’s going wrong, innovating, applying new technology and working to improve their own performance.”

Despite pledges from water companies to cut pollution incidents by 30pc, they have achieved only a 2pc fall, according to Ofwat.

Mr Black said the failure to hit the target meant suppliers’ performances were “inconsistent” and “not good enough”.

He said: “We see an inconsistent performance across the board in our assessment today that underlines the need to see culture change, a sharper focus on performance, alongside a big increase in investment which will take place from next year.”

The rebuke comes amid growing outrage over water bosses’ bonuses and shareholder dividends amid proposed bill rises.

The regulator measures how the 17 largest water companies in England and Wales perform on key metrics like leaks and sewer floodings.

Not one company was given top marks by the regulator.

Anglian Water, Welsh Water and Southern Water slipped into the lowest category of “lagging”, while the remaining 10 were rated “average”.

The beleaguered Thames Water moved up a category from “lagging” to “average” as it met some targets on leakage and supply interruptions.

Ofwat judges the performance of water companies in England and Wales each year against targets they set in 2019 for a five-year period until 2025.

If they fail to meet these, the watchdog restricts the amount of money they can take from customers.

Ofwat said the figures were provisional until it completed a review process.

Asked whether water companies were not scared of the regulator and whether its penalties were ineffective, Mr Black said: “It is for water companies and their boards – multi-billion pound enterprises – to turn around their performance.

“It is our role as a regulator to hold companies to account and that is exactly what we’re doing.”