Thames Water faces huge fine for customer failures

Thames Water, Britain's biggest water company, is facing a fine of up to £140m after being found guilty yesterday by the industry regulator of failing to meet guaranteed customer standards.

The penalty follows hard on the heels of the extra £150m Thames agreed to spend on mains replacement last month to avoid being fined by Ofwat for missing its leakage targets.

Ofwat said the precise size of the fine would be decided once an investigation by Ernst & Young into Thames was complete. The accountants were sent in five months ago after irregularities were discovered in the customer service performance information Thames was supplying to the regulator.

The standards that Thames has failed to meet are understood to relate to guaranteed response times to complaints and billing enquiries, the keeping of appointments, interruptions to supply and sewer flooding.

Water companies are liable to pay compensation of £20 a customer if they fail to respond to a complaint within 10 days or cancel an appointment with insufficient notice. Thames has not been doing this, which means it is now facing not just a fine but also the prospect of having to pay rebates to all those customers it should have compensated. The fine will go into the Treasury's coffers but its size will depend on what action Thames takes of its own accord - such as making a one-off customer rebate.

Philip Fletcher, the chairman of Ofwat, said it was "extremely disappointing" that the regulator had to take such action against Thames, coming on top of the company's breach of its leakage target. But he said no evidence had so far been found of the company deliberately mis-reporting information to Ofwat.

David Bland, the chairman of the Thames Water consumer council, also expressed his disappointment. "Customers of Thames Water do not expect a sloppy and slow response to their needs, therefore we expect to see a rapid change in the company's performance in the very near future."

Thames said it would pay whatever compensation was owing but could not say how many of its 13 million water and sewage customers had been affected.

Two other water companies - Severn Trent and Southern - are also facing fines for breaching customer service performance standards.