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. Not only did it fail to keep equipment working properly, resulting in spills of wastewater into the environment, but it also sought to cover up its malfeasance with lies.
The company has now agreed to pay a fine of £3m and give customers a rebate of £123m.
Ofwat also found that Southern Water manipulated its wastewater sampling process which resulted in it deliberately misreporting information about the performance of a number of sewage treatment sites. This meant the company avoided penalties under Ofwat's incentive regime.
The rebate includes £91m in penalties Southern Water had avoided and a further £32m of payments as recognition of its serious failures. Proportionate to the size of the business, this package of penalties and payments is the biggest Ofwat has ever imposed.
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. 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.”
Ofwat acknowledged that things had improved at Southern Water since a new chief executive, Ian McAulay, was appointed in January 2017 and the subsequent changes to the company's management team. 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 and behaviours. Investment has also been made into the failing treatment sites and work will continue to improve them, Ofwat said.
Ofwat has not investigated the environmental impact that resulted from Southern Water's actions. That is a matter for the Environment Agency, which is currently running its own investigation into Southern Water.
Southern Water 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.”