| Ofwat confirms £20m fine for Southern Water |
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| Friday, 08 February 2008 | |
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Water regulator Ofwat has confirmed it will go ahead with fining Southern Water a total of £20.3 million for deliberately misreporting information and delivering poor service to customers.
Ofwat first announced its proposal to fine the utility firm in November 2007 and has now decided to impose the penalty after a consultation period. Southern Water did not make any representations during the consultation on the initial proposal, but the company has the right to appeal to the courts if it disagrees with the amount of the fines or the imposition of the penalties. Southern Water's shareholders will bear the entire cost of this fine. It will not be passed on to its customers. Ofwat Chief Executive Regina Finn said: "Southern Water behaved unacceptably in deliberately misreporting customer service performance to Ofwat and systematically manipulating information to conceal its true performance over an extended period of time and the company has acknowledged this." The obligations on the companies to provide accurate and reliable data are designed to protect consumers in a monopoly environment. Ofwat explained that this protection is essential without a choice of supplier. "We expect companies to comply with their obligations and this fine sends a clear message that non-compliance is not a cheap or easy option," Finn added. Customer service performance data allows Ofwat to identify best practice, incentivise companies to improve performance and take any necessary action where companies fall below acceptable standards. The £20.3 million fine includes £19.8 million (3.5 per cent of Southern Water’s 2006/07 turnover) for deliberately misreporting and £470,000 for providing sub-standard services to customers. A financial penalty may not exceed 10 per cent of the company's turnover. Southern Water's regulated turnover for 2006-07 was £566.8m. Penalties are paid into the Consolidated Fund and are not returned to customers. The requirements of the Water Act 2003 mean Ofwat may only impose a penalty covering a twelve-month period. It cannot impose a penalty in respect of any contravention or failure before its powers came into effect on 1 April 2005. The penalty proposed cannot therefore take account of the full scale and duration of the failures that have been seen. Statutory restrictions mean Ofwat can only impose penalties for two specific one-year periods. Southern has already reduced its prices to return the money it should not have received at the 2004 price review. Bills will be reduced in 2008/09 to return the money it should not have received at the 1999 price review. Related articles Related links
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