CONSUMER COUNCIL FOR
WATER News Release (CCWater12/08) issued by The Government News
Network on 17 April 2008
Following
Ofwat's announcement today (Thursday 17 April 2008) that
Thames Water will pay a reduced fine of £9.7 million, down from
£12.5 million, for misreporting information to the regulator and
failing to provide some customers with compensation payments, the
Consumer Council for Water is surprised that Ofwat has decided to
reduce the fine, and disappointed that the money will go to the
Treasury, rather than to benefit consumers.
Any water company that breaks the rules must be penalised and
dealt with in the strongest way possible, but there is another way
to do this and benefit consumers at the same time. The regulator
can instead negotiate an extra investment package at a cost to
shareholders which is much larger than a traditional fine.
Alternatives to fines have been used before. For example, in
2006, Thames Water reported missing its leakage target, but
instead of a fine going to Treasury, it was agreed that a more
suitable punishment would be for the company to invest an extra
£150 million of company shareholders' money to replace ageing
pipes. This cost shareholders twice as much as the maximum fine
Ofwat could have imposed on the company (ten per cent of
turnover), and the extra investment is directly benefiting
consumers, not the Treasury.
This latest fine announced today against Thames Water added to
other confirmed fines against Southern Water (£20.3 million),
United Utilities (£8.5 million) and the intended fine against
Severn Trent (£35.8 million), means that over £74 million could
end up with Treasury, instead of being used to benefit consumers.
Dame Yve Buckland, National Chair of the Consumer Council for
Water, said: "Penalties can and should directly benefit
consumers, and make it very clear to companies that breaking the
rules will not be tolerated. Where penalties occur, consumers
should benefit first. They should not be just another source of
income for the Treasury.
"As a minimum, Thames Water needed to get their reporting
systems in order and compensate the customers who had been affected.
"We have serious concerns over the number of water companies
being investigated or fined by Ofwat, especially when consumers do
not see some benefit at the end of the process.
"The incidents of companies misreporting, deliberate or not,
have had a serious negative effect on consumers' views of the
water industry and companies will need to work hard to restore
their credibility."
Notes for editors
1. To date Thames Water and two other companies have been fined
by Ofwat. Southern Water was fined £20.3 million for misreporting
and failing to pay some customers compensation, and United
Utilities was fined £8.5 million for breaching rules governing
trading arrangements with associate companies. Ofwat has also
announced an intention to fine Severn Trent £35.8 million for
misreporting and failing to pay some customers compensation but
this has not yet been confirmed.
2. The Consumer Council for Water represents consumers in England
and Wales.
3. The Consumer Council for Water is the statutory water consumer
body, and operates as a non-departmental public body reporting to
the Department of Environment, Food and Rural Affairs and the
Welsh Assembly Government. It has a committee for Wales, and at
local level is supported by four regional committees in England.
4. Our national website is http://www.ccwater.org.uk.
For public enquiries to the Consumer Council for Water, please
contact via email on enquiries@ccwater.org.uk, our national
number, 0845 039 2837, or via minicom on 0121 345 1044.
The Consumer Council for Water
Victoria Square House,
Victoria Square, Birmingham B2 4AJ