Southern agrees new commitments as £126m penalty is confirmed

Ofwat has confirmed the £126 million in penalties and rebates Southern Water must pay following the water regulator’s investigation into the company.

Several other commitments have also been agreed by the water company.

Southern confirmed today (10 October) that employees will no longer receive bonuses and incentive payments for personal objectives linked to wastewater compliance when Southern Water fails to meet its relevant performance commitments.

The company has also agreed to make payments to wastewater customers between 2015 and 2020, who are no longer living in the region.

The company has also agreed to provide “greater transparency” on environmental performance which will see information that is available on pollution incidents, flow and spill reporting, wastewater treatment works compliance, regional bathing water compliance results, emissions and river levels published on its website.

Ofwat’s “large-scale investigation” into the water company found that Southern 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.

Southern Water chief executive Ian McAulay said: “I’m pleased that we have an opportunity to not only make appropriate amends to our customers past and present for the unacceptable failings of the past but to also commit to increased transparency on environmental performance.

“Since 2017 we have invested more than £100 million in improving our networks, systems and training our people. We are recognised as having made significant strides in improving our business. There is a lot more work to do but we are working hard to fully make amends to our customers and regain their trust.”

The £126 million payment consists of:

• £91.2 million for underperformance penalties – money it should have paid as part of Ofwat’s price review incentive regime, and;
• £31.7 million (in lieu of a greater fine). This is additional compensation to customers for failing in its legal obligations.
• Pay a fine of £3 million on top – in recognition of the serious and significant breaches of its licence conditions and statutory duties

Ofwat chief executive, Rachel Fletcher, said: “The findings in this case were shocking. We have listened to all representations and think it is right to confirm the biggest package of penalties and rebates we’ve ever imposed.

“Southern Water is serious about responding to the challenges it faces and is committed to putting things right. In doing so it is now bound by formal undertakings.

“We will continue to monitor its performance against those undertakings, and should Southern Water fail to comply with them, we will take further action.”

In response to Ofwat’s decision Tony Redmond, London and South East chair for the Consumer Council for Water (CCWater), said: “Every household that was served by Southern Water during this period of appalling performance failure paid a price for the company’s misreporting, so we’re pleased Ofwat has supported our call for wastewater customers who have since left the region to be compensated too.”

“Financial penalties alone cannot repair the damage that has been done to customers’ trust in Southern, which is why the company needs to spell out exactly what action it is taking to restore confidence in it.”