Southern Water has agreed to pay £126m in penalties and payments to customers following serious failures in the operation of its sewage treatment sites and for deliberately misreporting its performance.
The penalty will see customers get a rebate of at least £61 each. Under the agreement with water regulator Ofwat, each customer will receive at least £17 in 2021 and at least £11 per year for the following four years.
Ofwat found that Southern Water failed to operate a number of wastewater treatments works properly, including not making the necessary investment which led to equipment failures and spills of wastewater into the environment.
The regulator 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, meaning the company avoided penalties under Ofwat’s incentive regime.
The £126m package will see Southern Water pay a rebate of £123m to customers through their bills and pay a fine of £3m.
The rebate includes £91m in penalties Southern Water had avoided and a further £32m of payments as recognition of their serious failures.
Southern operates in the south-east of England, serving customers in Kent, Sussex, Hampshire and the Isle of Wight.
Ofwat said that, proportionate to the size of the business, the package of penalties and payments is the biggest it has ever imposed.
It added the penalty would have been larger had Southern Water not co-operated with its investigation, addressed its failings and agreed to the payment package.
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 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.”
Southern Water appointed a new chief executive in January 2017 and Ofwat said there have been "substantial changes" to the company’s management team since. It 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 the failings to take place.
Investment has also been made into the failing treatment sites and work will continue to improve them.
As part of the proposed settlement, Southern Water will to report to Ofwat on its progress in upholding its commitments.
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.”