Southern Water to pay out £126m after investigation finds ‘serious failures’

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Southern Water customers will receive a £123m bill rebate after an investigation found ‘serious failures’ in the operation of the company’s sewage treatment sites.

An investigation by the regulation body Ofwat has found that, between 2010 and 2017, some of Southern Water’s waste water treatment sites were manipulated by staff to pass sampling tests they otherwise might have failed.

Southern Water has said it is ‘deeply sorry’ for the past failures and said it was ‘fully committed’ to continuing to improve its business.

A £126m package proposed by Ofwat and agreed by Southern Water will see the company pay a rebate of £123m to customers through their bills and pay a fine of £3m.

Ofwat said that, proportionate to the size of the business, the package of penalties and payments was the biggest it had ever imposed.

Southern Water has implemented changes including introducing and committing 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, according to Ofwat.

As part of the proposed settlement, Southern Water will need to report to Ofwat on its progress in upholding these commitments.

A ‘shocking’ case

Rachel Fletcher, Ofwat Chief Executive, 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.

“The rebates on customer bills will go some way towards putting things right.

“It is now for Southern Water, under its new leadership, and with the improvements it is introducing, to show it has learnt from this unacceptable behaviour and can be trusted again.”

‘We are deeply sorry’

Ian McAulay, Southern Water’s Chief Executive, said: “In 2017, I was brought in to drive change and transformation.

“Since then we have been working very hard to understand past failings and implement the changes required to ensure we better deliver for our customers and meet the standards they deserve.”

“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.”

How will customers be affected?

Customers of Southern Water will receive the rebates in bills over the next five years, the company confirmed.

This will mean the rebate will be at least £17 per customer to be rebated in 2021, and at least £11 per year for the following four years.

Customers will bear none of the costs of the proposed fine or rebate, Southern Water said.

Sir Tony Redmond, London and South East Chair for the Consumer Council for Water (CCWater), said: “Customers of Southern Water will be absolutely appalled at the reckless disregard the company showed for the environment, which people care so much about.

“It also deliberately misled its customers, which is why it’s right the vast majority of the penalty is returned to bill payers who would have received most of this money had the company told the truth about its performance.

“Southern now has a huge task on its hands to rebuild the trust it has damaged.”

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