Severn Trent Water fined for bad service and liesOfwat confirms £35.8m fine

03 July 2008

Water running from tap

Water regulator Ofwat has confirmed it is fining Severn Trent Water a total of £35.8m for deliberately providing false information and poor customer service.

Ofwat proposed the fine - the biggest ever levied by the regulator - in April after ruling that customers had paid higher bills than necessary because of the failings.

Regulators have spent three months consulting on the fine, and said yesterday that it was being upheld after representations were received from two parties - the Consumer Council for Water and Severn Trent Water.

Shareholders to bear cost

Ofwat has stipulated the cost of the fine will be borne by shareholders. 'It will not be passed on to its customers,' the regulator said.

The announcement came a day after Severn Trent - which has 3.7 million household and business customers - was fined another £2m for lying about water leaks.

Regarding the £35.8m fine, Ofwat said the firm deliberately provided false customer service data in 2005 and earlier years, such as how it performed on making and keeping appointments and the number of customers who received no replies to complaints.

Poor service

The water firm is being fined £34.7m (2.9% of its 2006/07 turnover) for misreporting the information, and £1.1m (0.1% of its 2005/06 turnover) for providing sub-standard service to customers.

Ofwat chief executive Regina Finn said: 'Severn Trent's behaviour was unacceptable. The size of the 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. Any further attempts to deliberately mislead Ofwat could lead to even bigger fines in the future.'

Protect customers

She added: 'The obligations on the companies to provide reliable, accurate and complete data are designed to protect consumers in a monopoly environment.

'Without a choice of supplier, this protection is essential.'

Severn Trent serves a population of more than 8 million people from the Bristol Channel to the Humber, and from mid-Wales to the East Midlands.

'Lacked controls'

The firm said it would study the Ofwat decision and respond in due course. It has 42 days to launch a High Court appeal and must pay by August 22 if it chooses not to.

At the time the fine was proposed, Severn Trent's chief executive Tony Wray blamed the previous management regime for the failings, saying it was 'overly bureaucratic' and lacked sufficient controls.

Mr Wray said Ofwat was 'promptly alerted' when the false customer service data was discovered.

He said:'We fully acknowledge and accept that the company is responsible for its failures.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.'

Court fine

Mr Wray was appointed managing director of Severn Trent Water in March 2005 and promoted to the group's top job in October last year.

Severn Trent was fined £2m at the Old Bailey in London on Tuesday after pleading guilty to two offences under the Water Industry Act of making false returns to Ofwat concerning 2001 and 2002.

The court was told the company reported an estimated yearly water loss of 340 million litres per day to meet targets, while the true figure was around 514 million litres.

The lying came to light from emails and board meeting minutes. The case was brought by the Serious Fraud Office.

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