28/09/2007

Thames Water Fined £12.5 Million

Thames Water has been fined a total of £12.5 million by industry regulator Ofwat, it has been revealed.

Ofwat said that the company had been fined for failing to provide it with "robust information" and because poor processes and systems meant that customers received poor service.

Regina Finn, Ofwat Chief Executive, 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.

Ms Finn said: "The sensible approach Thames adopted in this case has been a significant factor that was taken into account when settling the level of this proposed fine. 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."

There was no evidence of fraud by Thames in this case, Ofwat stressed, and the regulator said that the investigation had not found any evidence of deliberate misreporting, nor had the misreporting affected the price limits set by Ofwat for the service customers' received.

The regulator said that the proposed fine was 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.

However, Thames Water had pledged to challenge the fine. Thames Water Chief Executive David Owens said that the fines were "totally disproportionate" and said: "We can see no justification for the level of the fines proposed. What particularly concerns us is this large sum of money could be spent directly on improving services to customers, but the only benefit will be to the Treasury. This makes little sense."

(KMcA)


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