Senedd members quizzed the boss of Dŵr Cymru about plans to cut around 500 jobs amid concerns about the "enormous" pay and bonuses pocketed by executives.
Peter Perry, the outgoing CEO, appeared before a Senedd committee on Wednesday after Welsh Water unveiled plans to cut annual spending by £50m.
Mr Perry is retiring from the industry after joining the company as an apprentice in 1979, with former Sydney Water boss Roch Cheroux set to take the reins in the new year.
He told the climate committee: "In my 46 years, I've never seen a time for the industry or the company where there is so much external focus, so much challenge."
"Customers are, rightly, expecting better standards and there's an unparalleled interest in the environment...we welcome both but there are also considerable challenges."
He outlined Welsh Water's 'trawsnewid' (transformation) plan to reduce its workforce by approximately 500 full-time-equivalent roles over the next 18 to 24 months.
"This is not a desired outcome, this is a necessity," he said.
'Doom loop'
Mr Perry explained the sector has faced hundreds of millions in extra costs due to the pandemic and droughts, with £60m spent on the Felindre water treatment works alone.
He told Senedd members a sector-wide credit-rating downgrade has increased borrowing costs, reducing Welsh Water's financial wiggle room.
"We are not in the same strong financial position we would have been in five years previously," he said. "The whole idea of trawsnewid is the company taking responsible action now to make sure we remain in a sustainable financial position for five, 10, 15, 20 years."
Llŷr Gruffydd, who chairs the committee, asked whether Welsh Water will have to do less due to having fewer people – warning of a "doom loop" of worsening performance.
Mr Perry insisted: "That's not the case at all...we would not, for one second, look at service levels dropping – our targets are tightening."
Welsh Water stressed the transformation programme will not impact its £4bn investment plan for 2025 to 2030, which is nearly double the amount of the previous five years.
'Disappointing'
Sam James, commercial managing director at Welsh Water, added: "It's about doing more with the people we have. How do we make it easier for people to do their job?"
"There is still a lot of manual data processing, for example."
The not-for-profit company is focusing on reducing "back-office" support and management roles to limit the impact on front-line teams.
Ms James said the plan is broader than a restructuring, with 50% of savings to come from employment costs and 50% from other efficiencies, such as better use of data and AI.
Martin Driscoll, Welsh Water's business support and people director, said 316 people have so far put their name forward for voluntary redundancy.
On the risk of losing experienced staff, Mr Perry said: "We will be disappointing some colleagues who would like to go on the basis that we can't lose their expertise."
'Fictional'
Janet Finch-Saunders, a Tory committee member, said: "There's been so much concern about the level of executive pay and bonuses at a time... when it is felt by many people that there has been a lot of failings within the water industry and, in particular, Dŵr Cymru."
Welsh Water's chief executive received a £460,000-a-year base salary in 2025/26, with total target remuneration of £894,000, according to the company's latest accounts.
Mr Perry, who earned a base salary of £369,000 in 2024/25, replied: "First and foremost, any of the variable pay that executives have is entirely based on performance so there has been a proportionate reduction."
He added: "I acknowledge I'm well paid, I'm not going to win the argument on that, but what I would say: the figure that's been in the public domain of an £800,000 salary is incorrect. 40% of it was linked to an accounting practice...for a future pension accrual."
Mr Driscoll described the £894,000 listed in the accounts as "to some extent fictional", claiming the chief executive's pay has "tracked downward" over the past five years.
Asked whether executives will take a pay cut, Mr Perry told the committee: "Trawsnewid is not about cutting people's pay in the organisation at all."
"We're losing colleagues, regrettably, but we're not attacking people's terms and conditions."
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