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Ofwat today published its proposals to fine Thames Water a total of £12.5 million. The economic regulator plans to fine the company £11.1million (0.8% of 2006-07 turnover) for failing to provide it with robust information and £1.4million (0.1% of 2005-6 turnover) because poor processes and systems meant that customers received poor service. They also missed out on payments they were entitled to. Ofwat Chief Executive Regina Finn said: "Water is a monopoly business and until we see a competitive market developing Ofwat must protect customers by regulating the companies' prices and quality of service. To do this we need complete, accurate and reliable information. Misreporting of information damages our ability to regulate the industry and therefore to protect customers. "Thames' reporting systems were inadequate. Deficient systems and low business priority on reporting non-financial data led to these serious failings. Our proposal to fine Thames reflects this and gives a clear signal to both the company and the water industry that non-compliance is not a cheap or easy option." The proposals follow Ofwat's 2006 investigation into Thames Water's reporting of its customer service performance. The regulator said that Thames acted responsibly by informing Ofwat of the misreporting, taking steps to investigate the situation itself, co-operating with the review and reimbursing customers the amount they should have received following poor service by the company in the past. "The sensible approach Thames adopted in this case has been a significant factor that was taken into account when setting the level of this proposed fine", said Regina Finn. "The cost of improving systems and compensating customers, along with the fine, will be borne by shareholders and will not be paid for by customers." Ofwat also stressed that there is no evidence of fraud by Thames in this case and the investigation did not find any evidence of deliberate misreporting. Nor has the misreporting affected the price limits set by Ofwat for the services customers' received. The regulator said that the proposed fine is appropriate given the seriousness of the misreporting and customer service failures by Thames, while also being fair and proportionate and taking account of the steps Thames has taken to remedy the situation. Notes to Editors: 1. The Water Services Regulation Authority (Ofwat) is the economic regulator of water and sewerage companies in England and Wales. It exercises its powers in a way that it judges will protect the interests of consumers, promote value and safeguard future water and sewerage services by allowing efficient companies to carry out their functions properly, and to finance them. 2. Copies of the 'Notice of Ofwat's proposal to impose a penalty on Thames Water Utilities for failures to meet the standards of performance prescribed under the GSS regulations' and ' Notice of Ofwat's proposal to impose a penalty on Thames Water Utilities in respect of regulatory reporting', are available on the Ofwat website, www.ofwat.gov.uk or from the Ofwat Library by phoning 0121-625 1373. 3. Representations about or objections to the proposal to impose a fine should be made by 5pm on Monday, 29 October 2007 to Keith Mason, Director of Regulatory Finance and Competition, Ofwat, 7 Hill Street, Birmingham B5 4UA, or by e-mail to keith.mason@ofwat.gsi.gov.uk. 4. Customer service performance data allows Ofwat to identify best practice, incentivise companies to improve performance and take any necessary action where companies fall below acceptable standards. 5. Companies have a duty under their licences to ensuring that the information they provide to Ofwat is reliable, accurate and complete. This allows Ofwat to compare information across the industry and fulfil its regulatory duties. This is essential where customers have no choice of water supplier. 6. A financial penalty may not exceed 10% of the company's turnover as set out in Water Industry (Determination of Turnover for Penalties) Order 2005 (SI 2005/477). Thames Water's regulated turnover for 2006-07 was £1.385 billion. The proposed fine of £11.1 million represents 0.8% of this turnover. The company's regulated turnover for 2005-06 was £1.35 billion. The proposed fine of £1.4 million represents 0.1% of this turnover. 7. Penalties are paid into the Consolidated Fund and are not returned to customers. The requirements of the Water Act 2003 mean Ofwat may only impose a penalty covering a twelve-month period prior to taking certain specified steps. Additionally, it cannot impose a penalty in respect of any contravention or failure before its powers came into effect on 1 April 2005. The penalty proposed cannot therefore take account of the full scale and duration of the failures that have been seen in this investigation. 8. Ofwat has already announced that it is proposing to impose financial penalties on Southern Water (see PN 13/06, 31 March 2006), on Severn Trent Water (see PN 16/06, 8 June 2006) and on Thames Water (PN 21/06, 19 July) for their failures to meet customer service standards. These press notices are available on the Ofwat website. Ofwat will consult on the final scale of a financial penalty in each case when the full extent of the customer service failures and the company's response is known. 9. Customers of all water and sewerage companies are entitled to minimum guaranteed standards of service, which are set out by the Government. The Guaranteed Standards of service (GSS) scheme applies to all water and sewerage customers, including potential customers, business customers, tenants and those in debt. Companies must inform billed customers of their rights under the scheme every year. If a company fails to meet any of the guaranteed standards, it must make a payment to affected customers. Standards cover areas such as:
Ofwat monitors company's performance against the customer service standards. Companies report their performance under the GSS to the regulator in an annual return (the June return). If the performance standard failures are not trivial Ofwat can impose a financial penalty. 10. Performance standards required in the GSS are set out in the Water Supply and Sewerage Services (Customer Service Standards) Regulations 1989 No.1159 and subsequent amendments Nos. 1383, 500, 3065, 2301 and 2035. Further information about the GSS can be found in Information Note: Guaranteed Standards Scheme, which is available on the Ofwat website. 11.Media enquiries to Ofwat Press Office on: 0121 625 1496/1416/1442  | ||||||
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