8th Jun 2006 07:30
Office of Water Services08 June 2006 PN 16/06 8 June 2006 OFWAT PROPOSES A FINANCIAL PENALTY ON SEVERN TRENT WATER FOR CUSTOMER SERVICE FAILURES Ofwat today gave notice that it is proposing to impose a financial penalty onSevern Trent Water for its failure to achieve customer service performancestandards under the Guaranteed Standards Scheme (GSS). This is a procedural step which must be taken before any financial penalty maybe imposed. Notice has to be given within 12 months of the failure to achievecustomer service standards. Consequently, the notice applies only to thecustomer service performance standard failures that have occurred since June2005. The performance failures covered by this notice are just one aspect of Ofwat'swider investigation into Severn Trent Water's customer service performance. Thisinvestigation also covers a longer time period than the period for which apenalty will apply. In April 2006 Ofwat received an interim report from Severn Trent Plc, the parentcompany of Severn Trent Water, into misreporting of customer service performancedata, including performance standards under GSS. Severn Trent Water made apublic announcement to that effect on 7 April 2006. As a result Ofwat and Severn Trent Water jointly appointed Ernst & Young LLP tocarry out an independent investigation into the irregularities. Thisinvestigation is ongoing. Once the Ernst & Young investigation is complete,Ofwat will consider its findings and what further regulatory action may berequired, including the total amount of any penalties, in relation to all theirregularities. Philip Fletcher, Chairman of the Water Services Regulation Authority, said: "It is extremely disappointing that we have had to launch this investigationinto an area of Severn Trent Water's customer service activities, following ourearlier investigation into other aspects of its business. "From the evidence we have seen it is clear that Severn Trent Water has failedto meet the GSS performance standards. The failures were within the company'scontrol and customers' interests have been damaged. "Customers' interests must be protected. A financial penalty will send a clearmessage to Severn Trent Water that it must meet its legal obligations to itscustomers." Ofwat will determine the scale of the financial penalty when the full extent ofthe customer service failures and the company's response is known. Severn Trent Water has provided an assurance that if customers have beendisadvantaged they will be reimbursed. Ofwat expects Severn Trent Water to workto identify customers who did not receive a payment under the GSS to which theywere entitled. Ofwat also expects that if Severn Trent Water has benefited fromthe irregularities in its price limits the company will fully adjust futureprices to its customers. The company is also taking action to improve its customer service performanceand the accuracy of the information it reports to Ofwat. Ofwat will monitor Severn Trent Water's progress in repaying customers,restoring customer services to acceptable levels and improving the accuracy ofits reporting. Notes to Editors: 1. •The Water Services Regulation Authority (Ofwat) is the economic regulator of water and sewerage companies in England and Wales. It exercises its powers in a way that it judges will allow companies to carry out their functions properly, and finance them. Its duties include protecting the interests of consumers, wherever appropriate by promoting effective competition. The Water Services Regulation Authority succeeded the Director General of Water Services on 1 April 2006. 2. •Copies of the 'Notice, under and in accordance with section 22A(4) of the Water Industry Act 1991 (as amended), of the Water Services Regulation Authority's proposal to impose a penalty on Severn Trent Water Limited', will be available on the Ofwat website, www.ofwat.gov.uk or from Ofwat Library by phoning 0121-625 1373. 3. •The GSS sets minimum performance standards in customer services which water and sewerage companies must provide. If a company fails to meet these standards it must make a payment to affected customers. Ofwat monitors companies' performance against the customer service standards. If the performance standard failures are not trivial Ofwat can impose a financial penalty. 4. •Performance standards required in the GSS are set out in the Water Supply and Sewerage Services (Customer Service Standards) Regulations 1989 No.1159 (as amended). Further information about the GSS can be found in an information note, which is available on the Ofwat website. 5. •Ofwat's power to impose financial penalties came into force on 1 April 2005. This power is not retrospective. Ofwat can only impose financial penalties for performance failures that occur in the 12 months preceding the issue of a penalty notice. 6. •This is a separate penalty to the further penalty mentioned in Ofwat's report of 7 March in its 'Interim report on allegations made against Severn Trent Water', which principally focused on bad debt, income and leakage. The Serious Fraud Office is now investigating leakage. 7. •A financial penalty may not exceed 10% of the company's turnover as set out in Water Industry (Determination of Turnover for Penalties) Order 2005 No. 477. Severn Trent Water's regulated turnover, as published in Ofwat's financial performance and expenditure report for 2004-05, was £990 million. Penalties are paid into the Consolidated Fund and are not returned to customers. 8. •Ofwat has published jointly with the Secretary of State for the Environment, Food and Rural Affairs and the National Assembly for Wales a statement of policy with respect to financial penalties in March 2005. This sets out the factors that will be taken into account in deciding whether to impose a penalty and its amount. It is available on the Ofwat website at www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/attachmentsbytitle/ penalties-statement240305.pdf/$file/penalties-statement240305.pdf 9. •Representations or objections by any interested party to the proposal to impose a penalty should be made to Sue Cox, at Ofwat, 7 Hill Street, Birmingham B5 4UA, or by e-mail to [email protected] They should be clearly marked 'Severn Trent Water Proposed Penalty'. The formal date for a response by Severn Trent Water is 31 October 2006.10. •Responses will be placed in our library and made available to the public, unless you have clearly indicated that you do not wish this to happen. In general, we will honour this request, but there may be circumstances in which, under the Freedom of Information Act 2000, we would be obliged to disclose responses. MEDIA ENQUIRIES TO OFWAT PRESS OFFICE ON: 0121 625 1416/1496/1442. Out of hoursenquiries to pager: 08700 555 500 water 502/503. Ofwat publications and pressnotices can be found on Ofwat's website at: www.ofwat.gov.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Severn Trent