Water firm faces £35.8m fine

Severn Trent Water was today facing a record £35.8 million fine for deliberately providing false data to industry regulator Ofwat and providing poor customer service.

The proposed penalty - which equates to 3 per cent of the company's turnover - is for misreporting customer service data during 2005 and earlier years, as well as "substandard" service.

Severn's actions resulted in customers paying higher bills than they should have done, Ofwat said.

The regulator said the company's shareholders would bear the entire cost of the proposed penalty. "It cannot be passed onto its customers," Ofwat said.

Severn said today it was lowering bills by £2.40 per household to ensure it had not profited from the episode.

It is the largest fine by value, but not in percentage of turnover, levied by Ofwat. Earlier this year Southern Water was fined 3.6 per cent of turnover, or £20.3 million, for similar offences.

Today's matters relate to a period before the appointment of the current management team. Severn Trent has 3.7 million household and business customers in England and Wales.

In a separate case of misreported data, Severn Trent said it would today plead guilty to two offences relating to leakage figures supplied to Ofwat in 2001 and 2002. The pleas are due to be entered at City of London Magistrates Court.

Concerning the customer service data failings, the regulator said Severn had deliberately misrepresented its performance on measures such as the number of customers who had received no replies to complaints, and those who had received late responses to bills.

The company's behaviour was "unacceptable" and had amounted to "deception", Ofwat said.

"By deliberately misrepresenting its performance, Severn Trent Water prevented Ofwat from identifying failures in the company's customer service and taking action to improve that service," the regulator added.

Ofwat chief executive Regina Finn said: "The size of the proposed fine reflects how seriously Ofwat takes the deliberate misreporting of information.

"This sends a clear message to the company and to the rest of the water sector - Ofwat will protect consumers and companies must comply with their legal obligations or pay the price.

"Any further attempts to deliberately mislead Ofwat could lead to even bigger fines in the future."