Southern Water was banned from paying bonuses last month over a so-called category 1 sewage spill in the New Forest, Hampshire, in August 2024.
Under new rules, companies are banned from paying bonuses if they do not meet environmental, consumer or financial standards, or are convicted of a criminal offence.
Southern Water has insisted the payment to Mr Gosden is not a bonus but part of a long-term incentive plan set up in 2023, and would be paid directly by shareholders.
A company spokesperson said its chief executive’s pay and benefits were decided by a remuneration committee “following protocols and rules set out by Ofwat and in accordance with the law”.
They added: “Lawrence Gosden’s 2025 package includes a relocation allowance and long-term incentive plan paid by shareholders, which marks improvements made during the delivery of our turnaround plan.
“Both of these payments represent common industry practice.”