Southern to compensate ex-customers as Ofwat locks in £126m penalty

Southern Water made pledges last week to compensate customers and help restore trust in its wastewater operations as Ofwat locked in the £126m penalty it consulted on in June for the company’s serious sewage treatment site failures and deliberate misreporting.

On top of its earlier undertakings, Southern confirmed it would:

• make payments to former customers (as well as current customers) who have since moved out of its area;

• make information on pollution incidents, flow and spill reporting, wastewater treatment works compliance, regional bathing water compliance results, emissions and river levels available on its website; and

• ensure employees do not receive bonuses and incentive payments for personal objectives linked to wastewater compliance when the company fails to meet its relevant performance commitments.

Ofwat last week confirmed Southern Water will pay £126m in penalties and rebates, the biggest package it has ever imposed. The company will return £123m to former and existing customers. This is made up of:

• £91.2m for underperformance penalties – money it should have paid as part of Ofwat’s price review incentive regime; and

• £31.7m (in lieu of a greater fine) additional compensation to customers for failing in its legal obligations.

Existing customers will receive an average of about £60 as a bill rebate over the next five years. Former wastewater customers will be able to apply directly for payment from April 2020.

Southern will also pay a £3m fine on top, in recognition of the serious and significant breaches of its licence conditions and statutory duties.

Ofwat found that Southern failed to operate a number of wastewater treatments works properly, including by not making the necessary investment in a timely manner. Southern Water’s failures led to equipment breakdowns and unpermitted spills of wastewater into the environment. Ofwat also found that Southern manipulated wastewater sampling processes which resulted in it misreporting information about the performance of a number of sewage treatment sites. This meant the company avoided penalties under Ofwat’s incentive regime.

Southern remains subject to ongoing criminal investigations by the Environment Agency. Ofwat has not made findings about environmental harm, site specific permit failures or whether the acts of Southern Water were criminal in nature.