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
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
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
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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