Southern Water starts paying £123m Ofwat rebates

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AS PART of the settlement reached with Ofwat last year, Southern Water are reducing wastewater charges to existing customers and making payments to eligible former customers totalling £123 million over five years.

The penalty was ordered in October following a two-year investigation and was referred to as ‘the biggest penalties and rebates package Ofwat has ever imposed.’

Ian McAulay, Southern Water’s Chief Executive, commented on the news: “Since 2017 we have been working very hard to understand past failings and implement the changes required to ensure we deliver better services for our customers and meet the standards they expect and deserve.

“There are no excuses for the failings that occurred between 2010 and 2017 outlined in Ofwat’s report published last summer, however we are fully committed to continuing the fast pace of change delivered since 2017 and regaining the trust of our wastewater customers and the wider communities we serve.”

For existing customers, the rebate payment will be in the form of a bill reduction starting on April 1st 2020.

In the first year, this will be approximately £14 per customer and in the following four years it will be approximately £9.

Customers who paid wastewater charges between 1 April 2015 and 31 March 2020, but who no longer receive their wastewater services Southern Water, may qualify for a payment of approximately £9 for each year (or part of) they were the company’s customer.

Southern Water has sought to improve their operations, and the steps the company had taken to ‘put things right’ was recognised by Ofwat at the time the penalty was announced by reducing their fine from £37.7m to £3m.

For example, the company has increased how transparent they are about their environmental performance, providing more detail about their releases near bathing waters as well as more frequent reporting about their pollutions performance and wastewater treatment compliance.

Other fundamental improvements made by the company have included:

• A complete restructure of the Executive Team and Board.

• Investing £26m in wastewater sites over the past year. Five-year plan overspend funded by shareholders of £150m to transform the business.

• Southern Water has fully supported these investigations and has simultaneously completed its own extensive internal review, which highlighted failures of people, processes and systems between 2010 and 2017.

• ‘One of the only organisations in the sector’ to have developed a pollution reduction programme based on data analysis of all sites.

The company has stated this to mean in practice;

• “We have a better understanding than ever before of what can go wrong and why and we’re improving our systems and processes to make sure the same issue does not occur twice.”

• “Our teams have been through rigorous training and our 24/7 response 365 days a year is stronger, quicker and more resilient than in the past.”

• Appointment of a new Director of Risk and Compliance to challenge front-line teams.

• Introduction of an industry-standard ‘three lines of defence’ model for regulatory reporting.

• “Increased reporting to Ofwat for greater scrutiny.”

• “Strengthened whistle-blowing policies and appointed an independent adjudicator so that any colleague with concerns feels confident that they will be listened to.”

• Enhanced compliance across all wastewater treatment works including compulsory compliance and Code of Ethics training for all relevant colleagues.

• Refreshed company vision, values and purpose which support and align to a modern compliance framework.

• More than £100m invested in IT systems and processes.