Southern spared legal action as Ofwat hits firm with £126m penalty for sewage failure

Southern Water has confirmed it will not face any further action by “law enforcement agencies” (widely considered to include the Serious Fraud Office) relating to a wastewater case for which Ofwat imposed a record breaking £126m fine last week.

Ofwat found Southern had significantly breached its licence conditions and statutory duties between 2010 and 2017 by failing to operate wastewater treatment works properly and by investing inadequately which led to equipment failures and release of wastewater into the environment. An Environment Agency investigation into the environmental impact of the incident is ongoing and could result in another financial hit for the company in due course.

Ofwat also found that Southern had deliberately “manipulated” wastewater samples and so misreported the performance of sewage treatment sites to avoid incurring regulatory penalties.

Southern is to hand out £123m in rebates to customers and pay a £3m fine. The rebate includes the £91m in penalties Southern Water had avoided and a further £32m of payments as recognition of its serious failures. The penalty was reduced from £37.7m to £3m “on the basis that Southern Water has undertaken to pay customers about £123 million over the next five years.”

Ofwat chief executive, Rachel Fletcher, said: “What we found in this case is shocking. In all, it shows the company was being run with scant regard for its responsibilities to society and the environment.”

Southern chief executive Ian McAulay, who took up his post after the breaches occurred, reported the compliance failings to regulators and law authorities following his appointment.

He has apologised unreservedly for the failings. He has also detailed a programme of changes relating to people, processes and systems that have been put in place to transform Southern’s operations, compliance, assurance and culture.