Severn Trent Water is fined £2m over false leakage data

Wednesday 02 July 2008 00:00

Severn Trent Water escaped with a lower-than-expected fine of £2m yesterday after it pleaded guilty at the Old Bailey to lying about leakage information for two years.

Following an investigation by the Serious Fraud Office (SFO), Britain's second-biggest water company admitted that it falsely reported leakage data to the water industry regulator, Ofwat, in 2001 and 2002. The charge carried the possibility of unlimited fines and some analysts had predicted a record £70m censure, but Judge Jeremy Roberts handed down a £2m fine and ordered Severn Trent to pay the SFO's court costs of £220,000.

Tony Wray, the company's chief executive, blamed its former management and said no one who was responsible still worked for the group. "We deeply regret the mistakes of the previous regime, for which we have apologised to customers," he said. "There were indefensible shortcomings in Severn Trent's previous management and control systems during the 2000 to 2004 era."

Severn Trent, which serves eight million customers in an area stretching from the Bristol Channel to the Humber, and from mid-Wales to the East Midlands, admitted two charges under the Water Industry Act of providing false leakage data to Ofwat.

During the hearing, the court was told of "sophisticated dishonesty" and "deliberate decisions" by senior staff to mislead the regulator.

In an internal email, the company's leakage director admitted to being "economical with the truth". No individuals were charged. Severn Trent had estimated that it lost 340 megalitres of water a day through leaks and broken pipes but the figure was closer to 514 megalitres.

The company blamed data problems, flooding and the foot and mouth outbreak. In other cases, the numbers were manipulated to artificially inflate domestic water usage.

Yesterday's penalty added to a £35.8m fine imposed on the company by Ofwat in April for deliberately giving false information and for poor customer service between 2005 and 2007.

Severn Trent pleaded guilty at City of London Magistrates' Court to lying about hitting key performance criteria between 2000 and 2004, allowing it to overcharge customers.

As well as the fine, it pledged to cut customers' bills by £2.40 per household.

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