Record £126m penalty for Southern Water will bring five years of customer rebates

Southern Water has been given a record £126 million penalty by industry watchdog Ofwat with almost all of it to be paid out in customer rebates over five years.

The regulator said that Southern would pay a £3 million fine, with the rest of the money going towards funding the rebates.

In 2021, customers’ bills are due to include a £17 deduction, with £11 a year coming off bills for the following four years, making £61 in total.

The company said that the money would have been used to pay dividends to shareholders and would not reduce the level of investment planned by the business.

In its penalty notice, Ofwat said: “Southern Water has deliberately misreported data to us about the performance of its wastewater treatment works.”

The data – and some key processes – were manipulated by staff to pass sampling tests they otherwise might have failed over seven years from 2010 to 2017, Southern said.

The company’s chief executive Ian McAulay 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.”

The regulator said that it would have imposed a £37.7 million fine but had reduced it “exceptionally” in part because Southern would be putting £123 million towards rebates for customers.

Southern, which has one of its main offices in Falmer and a treatment works in Peacehaven, added: “Southern Water has fully supported these investigations and has simultaneously completed its own extensive internal review which highlighted failures of people, processes and systems during that period.”

It said that it was taking robust action to bring about rapid improvement and had also put in place better whistleblowing procedures to underpin the changes.

The Environment Agency is understood to have started a criminal investigation into the case but has given no indication that the company or any former staff face court action at present.