Poor Maintenance & Reporting Lead To £126 Million Penalty

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26 June 2019

Southern Water has agreed to pay £126 million in penalties and payments to customers after dreadful maintenance led to sewage treatment failures.

A criminal investigation is also likely to go head as the company also stands accused of doctoring documents to hide the truth scale and seriousness of those failings.

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.

Misreporting

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. to avoided penalties.

Penalties

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 the seriousness of the failures. Proportionate to the size of the business, this package of penalties and payments is the biggest Ofwat has ever imposed - and would have been larger had Southern Water not co-operated with the investigation.

New head

Southern Water appointed a new Chief Executive in January 2017 and there have been substantial changes to the company’s management team since. 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. Investment has also been made into the failing treatment sites and work will continue to improve them.

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 penalties should serve as a reminder to all other companies about the gravity of their responsibilities to society and the environment.”

Response

Southern Water's relatively new CEO, Ian McAulay, said: "In 2017, I was brought in to drive change and transformation. We are deeply sorry for what has happened. There are no excuses for the failings that occurred between 2010 and 2017. We have made a number of fundamental improvements which have been recognised in the Ofwat report, including:

• "A restructure of the Executive Team and Board.

• "The appointment of a new Director of Risk and Compliance to challenge front-line teams.

• "Strengthened whistle-blowing policies and appointment of an independent adjudicator so that any colleague with concerns feels confident that they will be listened to.

• "Enhanced compliance across all wastewater treatment works including compulsory compliance and Code of Ethics training for all relevant colleagues.

• "Invested more than £100 million in IT systems and processes and £26 million in upgrading and maintaining assets."

Picture: Southern Water has invested in IT including systems for field based engineers.

Article written by Brian Shillibeer | Published 26 June 2019

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