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Southern Water - £126 million Ofwat Penalty but Environment Agency Prosecution Pending

03 July 2019

Following a two year investigation by Ofwat, Southern Water has been ordered to pay a penalty of £3 million and has undertaken to return another £123 million to customers over the next five years. The investigation looked at the performance of Southern Water's wastewater treatment sites and the company’s reporting of relevant compliance information to the regulator.

 

Ofwat concluded that Southern Water failed to operate a number of wastewater treatments works properly, in some cases by not making the necessary investment which led to equipment failures and spills of wastewater into the environment. Southern Water was also found to have manipulated its wastewater sampling process which resulted in it misreporting information about the performance of a number of sewage treatment sites.

The proposed penalties are subject to consultation until 19 July 2019 and but this is unlikely to be the end of the matter. The Environment Agency has confirmed that it is conducting a separate  criminal investigation and expects to commence court proceedings soon. If convicted, Southern Water is likely to face another large fine in the criminal courts. Since the introduction of Sentencing Guidelines in 2014, fines for breaching environmental legislation have risen significantly. Although the Guidelines set a range of between £100 and £3 million for fines, they also provide for greater fines for companies whose annual turnover greatly exceeds £50 million. Thames Water Utilities Ltd was fined an unprecedented £20 million in 2017 for a series of pollution incidents involving the River Thames.

The Southern Water case demonstrates yet again the increasingly robust approach to penalties taken by both regulators and the criminal courts aimed at ensuring the message is brought home to directors and shareholders.

 

Further Reading