LONDON: Southern Water has agreed to pay £126 million in penalties and payments to customers following serious failures in the operation of its sewage treatment sites and for deliberately misreporting its performance.
In the course of a large-scale investigation into the water company, Ofwat found that Southern Water failed to operate a number of wastewater treatments works properly, including by not making the necessary investment which led to equipment failures and spills of wastewater into the environment.
Ofwat also found that Southern Water manipulated its wastewater sampling process which resulted in it misreporting information about the performance of a number of sewage treatment sites. This meant the company avoided penalties under Ofwat’s incentive regime.
The £126 million package will see Southern Water pay a rebate of £123 million to customers through their bills and pay a fine of £3 million.
The rebate includes £91 million in penalties Southern Water had avoided and a further £32 million of payments as recognition of their serious failures.
Proportionate to the size of the business, this package of penalties and payments is the biggest Ofwat has ever imposed. The amount would have been larger had Southern Water not co-operated with our investigation, addressed its failings and agreed to this payment package.
Southern Water wastewater customers should expect a rebate on their bills of £61, with £17 in 2020/21 and £11 in each of the following four years.
Southern Water appointed a new Chief Executive in January 2017 and there have been substantial changes to the company’s management team following this. Southern Water has introduced and committed to new governance arrangements to support accurate monitoring and reporting, and a programme to change the company’s culture, which enabled these failings and behaviours. Investment has also been made into the failing treatment sites and work will continue to improve them.
As part of the proposed settlement, Southern Water will need to report to Ofwat on its progress in upholding these commitments.
Ofwat Chief Executive, Rachel Fletcher, said: “What we found in this case is shocking. In all, it shows the company was being run with scant regard for its responsibilities to society and the environment. It was not just the poor operational performance, but the co-ordinated efforts to hide and deceive customers of the fact that are so troubling. The previous management failed to stamp out this behaviour and failed to manage its plants properly. In doing so, Southern Water let-down its customers and operated in a way completely counter to the public service ethos we expect. That is why the company deserves such a significant sanction. We also think it is important Southern Water has a formal fine on their record for this serious breach.
“The rebates on customer bills will go some way towards putting things right. It is now for Southern Water, under its new leadership, and with the improvements it is introducing, to show it has learnt from this unacceptable behaviour and can be trusted again.
“Today’s announcement should also serve as a reminder to all other companies about the gravity of their responsibilities to society and the environment and that we will take action if they neglect them.”
Ofwat has not investigated the environmental impact as a result of Southern Water’s actions. That is a matter for the Environment Agency, who are currently investigating Southern Water.
These proposed penalties are now subject to consultation, closing on 19 July 2019. Southern Water’s wastewater treatment compliance has been under formal investigation by Ofwat since June 2017 due to breaches of licence conditions and statutory obligations.
The total value of the package of penalties and payments is equivalent to 6.7% of Southern Water’s wholesale wastewater turnover. This is by far the largest proportion of turnover we have ever set out – the previous highest was 3.5%.