30.04.08 Severn Trent Water to be fined £35.8 million

Water regulator Ofwat has announced plans to fine Severn Trent Water £35.8 million, 3% of its turnover, for deliberately giving them false information and providing a poor service to customers.

Ofwat has specified that Severn Trent Water's shareholders must bear the entire cost of the proposed penalty and that it cannot be passed on to customers. While the fine is one of the heaviest ever proposed, Ofwat argues that customers are completely dependent on the regulator for protection in a monopoly industry where they have no choice of supplier.

Tony Wray, chief executive of Severn Trent Plc, responded by saying that he and his new management team had alerted Ofwat and taken steps to improve working practices as soon as they uncovered misreporting and poor service. Those directly responsible for customer relations mistakes are no longer with the company, which has issued an apology to customers for its failings. Having received notice from Ofwat, Severn Trent Plc has promised to consider carefully the proposed fine and “respond appropriately”. Any objections must be submitted to Ofwat before May 6th.

Mick Rix, National Officer of the campaigning trade union GMB, criticised Ofwat for using the “pointless recourse” of financial penalties. He said that fines were irrelevant to utility companies operating in a monopoly culture and that it would be customers and workers who would end up footing the bill.

The fine is the latest in a string of penalties imposed by Ofwat on water companies for failures in reporting and customer service. Thames Water was fined £12 million in September last year and Southern Water was ordered to pay over £20 million in February this year.

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