Thames Water, the biggest supplier in the UK and which recently secured a cash injection from shareholders as it struggled to stay afloat, was ordered to return the highest amount at 101 million pounds.
The decision by water regulator Ofwat comes amid a long-running scandal over privatised water firms pumping raw sewage into waterways.
"The targets we set for companies were designed to be stretching -- to drive improvements for customers and the environment," Ofwat chief executive David Black said in a statement.
"However, our latest report shows they are falling short, leading to 114 million pounds being returned to customers through bill reductions.
"While that may be welcome to billpayers, it is very disappointing news for all who want to see the sector do better," Black added.
Britain's government in July announced any company and individual polluting the country's rivers and other ecosystems would be liable for unlimited fines.
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