Southern Water in criminal probe after £126m fines
By Wale Azeez, business reporter
Tuesday 25 June 2019 10:59, UK
The Environment Agency is investigating what regulator Ofwat said was a 'shocking case' of disregard to customers and environment
Southern Water is under criminal investigation by the Environment Agency after "serious failures" in its sewage treatment sites and for deliberately misreporting its performance.
The Environment Agency is investigating the impact of wastewater spillages as a result of Southern Water's negligence.
The investigation into Southern Water's conduct comes after the utility incurred a record £126m package of fines and customer rebates from Ofwat, in what the industry regulator said was a "shocking case" of disregard to its customers and the environment.
Ofwat's large-scale investigation found Southern Water failed to operate a number of wastewater treatments works properly, including by not making the necessary investment, leading to equipment failures and spills of wastewater into the environment.
It added that Southern Water also manipulated its wastewater sampling process, which led to it misreporting information to the watchdog and avoiding penalties.
Southern Water will pay a rebate of £123m to customers through their bills and a fine of £3m.
The rebate includes £91m in penalties that Southern Water had avoided and a further £32m of payments in recognition of their serious failures, Ofwat said.
Southern Water wastewater customers can now expect a rebate on their bills of £61, with £17 in 2020/21 and £11 in each of the following four years.
In proportion to Southern Water's size, the penalties and payments package is the biggest ever imposed by the watchdog, equivalent to 6.7% of Southern Water's wholesale wastewater turnover.
Ofwat's previous highest penalty was set at 3.5% of turnover.
The watchdog also said that the penalties "would have been larger" had Southern Water not co-operated with its investigation, addressed failings and agreed to the existing payment package.
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."
Ian McAulay, chief executive of Southern Water, said: "We are deeply sorry for what has happened.
"There are no excuses for the failings that occurred between 2010 and 2017 outlined in Ofwat's report.
"We have clearly fallen far short of the expectations and trust placed in us by our wastewater customers and the wider communities we serve.
"We are fully committed to continuing the fast pace of change delivered since 2017.
"There is a lot more work to do but we're pleased that this proposal agreed with Ofwat enables us to fully make amends to our customers and regain their trust as quickly as possible."
The regulator did acknowledge that there had been substantial changes to Southern Water's management team following the appointment of a new chief executive in January 2017.
It said: "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."