Water company facing £35.8 million fineSevern Trent customers will get bill discount
08 April 2008
Severn Trent Water is facing a £35.8 million fine for deliberately providing false data to industry regulator Ofwat and providing poor customer service.
The proposed penalty - which equates to 3% of the company's turnover - is for misreporting customer service data during 2005 and earlier years, as well as ‘substandard’ service.
Severn Trent Water's actions resulted in customers paying higher bills than they should have done, Ofwat said.
The regulator said the company's shareholders would bear the entire cost of the proposed penalty and it could not be passed on to its customers.
Ofwat Chief Executive Regina Finn said: ‘Severn Trent Water's behaviour was unacceptable. The size of the proposed fine reflects how seriously Ofwat takes the deliberate misreporting of information.
‘This sends a clear message to the company and to the rest of the water sector - Ofwat will protect consumers and companies must comply with their legal obligations or pay the price.’
Severn Trent Water's behaviour was unacceptable
Ofwat said that by deliberately misrepresenting its performance, Severn Trent Water had prevented the regulator from identifying failures in the company's customer service and taking action to improve that service.
Customers subsequently received a service that was far below what the company had reported it was delivering, and in many cases was below the statutory minimum standards
Severn Trent Water's actions also resulted in customers paying higher bills than they should have done. Some customers also missed out on payments they were entitled to because performance fell below prescribed standards.
Severn Trent Water serves more than 8 million customers in England and Wales.
Severn Trent Chief Executive Tony Wray said the company was lowering bills for customers by £10.6 million - about £2.40 off each customer's annual bill - to ensure it had not profited in any way.
He added: ‘There is no doubt that the previous regime and culture in place during the era from 2000 to 2004 was overly bureaucratic and lacked sufficient controls and procedures.
‘Those who were responsible for the customer relations mistakes are no longer with Severn Trent and we apologise to our customers for their failings.’
In a separate case of misreported data, Severn Trent said it would today plead guilty to two offences relating to leakage figures supplied to Ofwat in 2001 and 2002. The pleas are due to be entered at City of London Magistrates' Court.
The £35.8 million proposed fine would be paid to the Treasury but a water watchdog, the Consumer Council for Water, said it was disappointed the money won't be used to help consumers.
Spokesman James Perowne said: ‘A precedent for this was set in 2006 when Thames Water missed its leakage targets.
‘Instead of imposing a fine, Ofwat agreed that Thames should invest an extra £150 million of shareholders' money in order to replace ageing pipes.
‘We would have preferred it if a similar arrangement was made in this situation. In fact we called for Ofwat to reduce customer bills as a penalty, rather than giving the money to the Treasury.’