Thames Water gets £12m fine for “poor service”

October 9, 2007 at 11:48 am

Britain’s largest water company, Thames Water is facing a colossal fine to the sum of £12.5 million. Indeed, after an official investigation last year, water regulator Ofwat has ruled that Thames Water has failed its customers on a number of different grounds, such as a poor quality of service and a breach of official rules.

Ofwat has said that, out of the £12.5 million fine, £11.1 million was because of a failure to provide “robust information” to the regulator, whilst the other £1.4 million was for poor service provided to customers. For example, some had not received the money they had been entitled to and many had received a loss in water supply. Though the sum comes as a huge and somewhat extreme blow to Thames Water, Ofwat insists that the fine is proportionate to the seriousness of the failures experienced by customers.

What Thames Water has done is particularly concerning, they say, because water is a monopoly business and quality is therefore vital given that customers have very little choice but to comply with existing procedures. Though Ofwat admit that there is no evidence of fraud from the company and that any misreported information hasn’t been deliberate, they still believe that the various ways in which the company has let customers down is enough to warrant a fine.

Contrary to popular opinion, full consideration was in fact given to Thames Water’s efforts to remedy the situation as well and all the details have been taken into account before the decision was reached. Furthermore, Ofwat say that the new improvement costs and the cost of the fine will not be paid by customers but by shareholders.

Thames Water maintain that the fine is “disproportionate” and undeserved. In a statement on their website, the company say that they will be appealing the decision as they believe that the fine is unreasonable, especially considering Ofwat already accepted that the company has gone to great lengths to remedy the situation. Thames Water also believe that the fine will actually mean it is the customers who lose out.

As Thames Water Chief Executive David Owens points out, the money which they are being asked to give as a fine could be put towards improving the very service that the dispute is about. This fine, however, will simply benefit the Treasury and nothing more.

This concern has also been expressed by David Bland, chairman of the Consumer Council for Water Thames, who says that the money would be best off either going to the customers or used to improve Thames Water’s service. Given that the very purpose of any fine is to improve services rather than punish, this makes good sense to most people.

The fine is thought to be the biggest ever fine given by the water regulator. However, under regulations, it is perfectly permissible. In fact, Ofwat has the right to fine a company up to 10% of its annual turnover. For Thames Water, it may come as a surprise that this actually comes to around £1.35 billion according to last year’s figures.

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