Severn Trent not appealing £35.8m false info charge

FTSE 100 giant Severn Trent has said today it will not be contesting a £35.8m fine handed down by its economic regulator for 'deliberately providing false information.'

Ofwat imposed the massive penalty after discovering Severn Trent's reporting of water leakage figures between 2005 and 2006 was not accurate and the company has decided not to appeal the decision.

In a statement to the City, the company said: 'Severn Trent plc today announces that, notwithstanding reservations about the enforcement process, Severn Trent Water has decided not to appeal the fines of £35.8m imposed by Ofwat for deliberately providing false information to Ofwat in the period 2005-06, and for delivering poor service to its customers in the same period.'

An Ofwat report found that Severn Trent provided data that had been 'deliberately miscalculated and which meant customers had been overcharged.' The company also had poor internal processes and controls, which in the case of estimating and recording income led in Ofwat’s view to price limits for the period 2005-10 that were higher than they should have been, Ofwat added.

Breakdowns showed Ofwat fined Severn Trent £34.7m - almost 3% if its 2006-2007 turnover for 'deliberately misreporting some key customer service information,' the company said.

Th remainder of the fine was handed down for providing sub-standard services to customers in 2005-06 by failing to meet statutory Guaranteed Standards of Service.

Severn Trent Water's Customer Relations Department deliberately misreported some of its customer service data to hide its true performance in 2005 and in earlier years. This damaged Ofwat's ability to regulate the water sector effectively and protect customers.

When the fine was first proposed in April, Ofwat chief executive Regina Finn said: 'Severn Trent Water's behaviour was unacceptable. The size of the proposed fine reflects how seriously Ofwat takes the deliberate misreporting of information.'

Chief executive Tony Wray added: 'This final step now draws a line under the legacy issues stemming from a previous management regime. As agreed with our regulator, Ofwat, we can now focus entirely on our continuing journey to put Severn Trent Water back into the positive position our customers, regulators, shareholders and employees deserve.'

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