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.