Severn Trent fined a record £35m after false figures inflated bills

Wednesday, April 09, 2008

WATER firm Severn Trent was yesterday fined a record £35.8 million and pledged to repay £10.6m to its customers after admitting an embarrassing catalogue of failures. The company was penalised by industry regulator Ofwat for deliberately providing false information and for poor customer service.

According to Ofwat, customers ended up paying higher bills than they should have done as a result of the firm's actions.

Severn, which has 3.7 million household and business customers, said yesterday it would hand back customers a total of £10.6m – or £2.40 per bill.

The firm also faces a further hefty fine for a separate case of misreporting involving data about leaking pipes.

Severn said it would be admitting two charges of reporting false leakage data to Ofwat after a lengthy Serious Fraud Office (SFO) investigation.

Ofwat stipulated that the £35.8 million punishment – which equates to 3 per cent of Severn Trent's turnover – must come out of shareholder funds and not be passed on to customers.

Ofwat said the firm had deliberately falsified customer service data in 2005 and before, including misrepresenting the numbers of customers who received no replies to complaints.

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

Tony Wray, Severn's chief executive, blamed the previous management regime, saying it was "overly bureaucratic" and lacked sufficient controls.

Wray said Ofwat was "promptly alerted" when the false customer service data was discovered.

He added: "We fully acknowledge and accept that the company is responsible for its failures. There is no doubt that the previous regime and culture in place during the era from 2000 to 2004 was overly bureaucratic and lacked sufficient controls and procedures.

"Those who were responsible for the customer relations mistakes are no longer with Severn Trent and we apologise to our customers for their failings."

Severn serves a population of more than eight million people from the Bristol Channel to the Humber, and from mid-Wales to the East Midlands of England.

Two years ago the company was forced to apologise to customers after "deliberately miscalculated or poorly supported" data inflated bills by £42 million.

James Perowne, central and eastern chairman of the Consumer Council for Water, said: "The penalty should send a message to the rest of the industry that this behaviour is unacceptable, and while these incidents took place four years ago, they have had a serious negative impact on consumer confidence in the company."

MONEY DOWN THE DRAIN

THE record fine for Severn Water is the latest penalty imposed by Ofwat, which regulates the water industry in England and Wales.

In February, it fined Southern Water £20.3 million for "deliberately misreporting information and delivering poor service to customers".

Thames Water was fined £12.5m in September 2007 for failing to provide Ofwat with "robust" information and for its poor customer service systems.

United Utilities Water was fined £8.5m in June 2007 and Ofwat forced Thames Water to spend an extra £150m to repair pipes.

This article was featured on The Scotsman website.

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