Southern Water fined for customer service failure

Southern Water faces a large fine for customer service failure.

Last October, managers at Southern discovered they had not been compensating customers whose complaints were dealt with too slowly. Although no penalty has been fixed yet, the company could be fined up to 10% of its annual turnover.

Southern has customers in Kent, Sussex, Hampshire and the Isle of Wight.

Philip Fletcher, Ofwat's director general, said: "From the evidence I have seen, Southern Water has failed to meet the Guaranteed Standards Scheme performance standards, the failures were within the company's control and customers' interests have been significantly damaged.

"A financial penalty will send a clear message that each water company must meet its legal obligations to its customers."

Under its licence from Ofwat, Southern, like other water utilities, is obliged to pay customers 25 if, within 10 days, it has not responded to a written complaint or enquiry sent in by letter or e-mail.

The company had been telling Ofwat that the standard had been complied with 100%.

But when a new billing system was introduced last autumn, it became clear that this was not the case and that about 100,000 customers had not been paid the compensation they were due.

The company, led by its new chief executive Les Dawson, immediately told Ofwat about the problem and also asked the Serious Fraud Office to investigate. The SFO is still considering whether to do so.

At the beginning of this month, Southern said it had already paid 100,000 to some customers, but admitted in its annual accounts that the whole affair might cost it 5.7m.

As well as compensating customers and paying any fine to Ofwat, it will have to foot the bill for a full investigation by accountants and lawyers whom it appointed to get to the bottom of the problem.

Ofwat said it would wait until the investigating accountants had finalised their report before deciding on the level of fine or any other punishment.

But it pointed out that Southern had agreed to pay customers in full, and to cut its prices if it turned out that the company took advantage of the false data to get more favourable price limits from the regulator.