Thames Water has been fined £9.7 million for poor service and misreporting information to the regulator.
The company escaped a larger £12.5 million fine, originally proposed by Ofwat, as the watchdog decided the misreporting was not deliberate.
Ofwat concluded that the firm’s processes were so bad that it was unaware it had breached the rules on reporting customer service information.
Thames Water, with more than 13 million customers in London and south-east England, is one of a raft of water firms to be hit by hefty fines for poor service and compliance.
Regina Finn, Ofwat chief executive, said: ‘Thames Water’s systems and processes were inadequate and customers lost out.
‘The penalty reflects the importance we attach to reliable, accurate and complete information and gives a clear signal to both the company and the water sector that non-compliance is not a cheap or easy option.
However the Consumer Council for Water was critical of Ofwat’s decision to reduce the fine and said it was disappointed the money would go to the Treasury, rather than benefit the consumer.
Chairwoman Dame Yve Buckland said: ‘We have serious concerns over the number of water companies being investigated or fined by Ofwat, especially when consumers do not see some benefit at the end of the process.’
David Owens, Thames Water chief executive, said: ‘This is still a high figure considering that the failures were unintentional, rather than deliberate, but we welcome the reduction.’