Ofwat proposes £20.3 million fine on Southern Water
Posted: Wednesday 14th November 2007
Ofwat has published its proposals to fine Southern Water a total of £20.3 million.
The economic regulator plans to fine the company for deliberately misreporting information prior to October 2005 and because poor processes and systems meant customers received poor service. Customers also missed out on the payments they were entitled to because of these service failures.
Ofwat Chief Executive Regina Finn said: "Southern Water deliberately misreported its customer service performance to Ofwat and systematically manipulated information to conceal the company's true performance over an extended period of time.
"The company benefited directly from this misreporting at the last two price reviews, meaning Southern was able to increase its prices by more than it should have done. Customers received higher than necessary bills because of the company's deception.
"Southern Water's shareholders will bear the entire cost of this fine. It will not be passed on to its customers. The magnitude of this fine reflects the magnitude of the offence – deliberately misleading the regulator, failure of the Southern Water Board of Directors to pick up the deception, the resulting poor service to customers and damage to the regulatory regime, in general."
Ofwat notes that the company took prompt action once it discovered the misreporting. It reported the situation to Ofwat and the Serious Fraud Office, initiated its own investigation and co-operated fully with Ofwat's investigation.
The company's new management is overseeing action plans to address the issues found and has ensured customers received payments they were entitled to. Southern is also returning money to customers who paid higher bills than they should have done.
These factors have been taken into account when considering the amount of the financial penalty.
Southern Water fully acknowledges Ofwat’s requirement to fine the company for its misreporting of customer service performance and failure to make all guaranteed standards payments.
The company is confident this will conclude a two-year investigation initiated by its new management team on discovery of the irregularities in October 2005.
This came about during a project to install a new billing system – ironically to improve customer service – and showed that figures reported to Ofwat, relating to response times to customers contacting the company’s customer service centre, did not always match performance.
As a result the regulator is levying two substantial fines on the company for its misreporting of customer service statistics and its failure to make guaranteed standards payments to customers up until October 2005.
Chief Executive Les Dawson said: “I understand Ofwat’s intention to fine us for what happened in the past. Today, I would like to reassure customers that those historically entitled to guaranteed standards payments have now been paid and that we are well on course to meeting a service improvement plan agreed with the regulator.”
Southern Water continues to run a series of advertisements in the local press and on local radio to ensure customers are fully aware of the matter. The company has also updated the Government’s Minister for the South East Jonathan Shaw MP.
