1. Making amends to our customers
We’re making amends for historic failings in the management and reporting of compliance at our wastewater treatment works.
2. Why we’re making amends
In 2016 the Environment Agency started an investigation into a small number of our wastewater treatment sites.
In June 2017, our regulator, Ofwat, started an investigation into possible breaches of licence conditions and our statutory reporting obligations relating to the management and operation of our wastewater treatment works.
Our own internal review discovered a problem with sampling processes at some of our sites, which meant that we needed to restate our wastewater performance for the period 2010–17. The findings of this review have been shared with our regulators.
These breaches occurred because of failures of people, processes and systems. We acted promptly and decisively to make sure all the issues identified in the investigation have been addressed.
In October 2019, Ofwat’s investigation resulted in a notice to take enforcement action against us.
3. How we’re making amends
1. Corrective actions and interventions
In October 2019 we signed formal undertakings under Section 19 of the Water Industry Act 1991 relating to the numerous changes we've put in place to ensure that the issues identified in the investigation were stopped and cannot be repeated.
The Undertakings contain a wide range of corrective actions and interventions across seven themes:
A. Customer redress measures;
B. Technical review of Wastewater Treatment Works;
C. Organisational compliance process measures;
D. Organisational cultural change measures;
E. Ensuring Transparency;
F. Condition P Certificate Assurance Undertaking; and
G. Reporting on Compliance with the Undertakings.
We continue to make progress on all the Undertakings, with most of them now substantially complete. Our focus now moves to embedding the improvements and monitoring the effectiveness of that embedment.
Compliance with the Section 19 undertakings is subject to a formal assurance regime which is reported to both our Board and to Ofwat on a regular basis. In our August 2023 update to Ofwat we were able to report that the actions arising to ensure compliance have either been completed or are on track to be fulfilled within the relevant time frame in the five-year period of the Undertakings. Our focus is now on embedding the improvements and monitoring the effectiveness of that embedment.
The programme of work has been extensive and looks at a number of improvements across our operational and capital asset base, our reporting processes and systems (including Rivers and Seas Watch). This is in addition to the wide range of compliance improvements and cultural improvements that have already been implemented as part of the undertakings. Our current focus is to look towards the end of the undertakings in October 2024 and demonstrating to ofwat that we have maintained compliance with the undertakings.
2. Customer bill rebates
We agreed to make significant customer bill rebates and payments to former customers, totalling £123 million*, in recognition of our failure to meet the expectations of our customers and wider stakeholders, as well as our regulators.
If you're an existing customer and continue to pay wastewater charges after 1 April 2020, you'll automatically receive a reduction to your wastewater bills between 1 April 2020 and 31 March 2025.
- Since 1 April 2020, we have been reducing our wastewater charges for existing customers for a period of 5 years and we have made payments to eligible former customers – totalling £123 million*.
- The former customer payment scheme ran from 1 April 2020 to 30 September 2020 and resulted in over £1 million being paid out.
*In 2017-18 prices
Frequently asked questions
Yes, if you pay wastewater charges between April 2020 and March 2025.
You don’t need to do anything. Customers who pay wastewater charges between April 2020 and March 2025 will automatically receive a reduction in their bills.
How and when we can reduce customers bills is contained in the formal undertaking that we have given to Ofwat. The payment of the penalties that have been avoided would normally be made over an extended period of 50 or more years. Instead, we’ve reduced wastewater charges to customers spread over a shorter period of five years, 2020 to 2025.
No. Customers will bear none of the costs of the payments, rebates or the fine.
Yes. We're working closely with South East Water to ensure each eligible household receives a reduction in their wastewater charges each year from April 2020 until March 2025.
No, because each household bill payer will receive a reduction in their wastewater charge each year from April 2020 until March 2025. So if you pay wastewater charges to us during some of this period you will receive a partial rebate.
Yes, because household bill payers that pay wastewater charges after April 2020 will receive a reduction to their wastewater charges between April 2020 and March 2025.
Yes, because each bill payer will receive a reduction in their wastewater charges each year from April 2020 until March 2025.
If you're the bill payer, you'll be eligible for a reduction in your wastewater charges each year from April 2020 until March 2025.
Yes. However, the reduction in wastewater charges may be offset against the value of any outstanding debt.
If you continue to pay wastewater charges after April 2020, you won't need to fill out any forms to get the reduction in your bill – it will be applied automatically.
No. The reduction is tied to our wastewater pricing. Only those who pay wastewater charges are eligible.
3. Improving transparency around our environmental performance
The Final Notice published by Ofwat included plans for us to commit to greater transparency on environmental performance and publish available information on our website.
Since then, we've developed content on our website which, where possible, provides relevant information on environmental wastewater performance, including:
- pollution incidents
- flow and spill reporting
- wastewater treatment works final effluent compliance
- regional bathing water compliance results
- emissions
- river levels
As some of this data and information is provided to us by the Environment Agency, we’ve worked with them to publish and link to relevant Agency data and environmental information on our site.
We also provide updates on the environmental improvement work we carry out via investment programmes, catchment management and our partnership working programmes.
We’ll continue to share spill notifications with stakeholders for priority coastal locations on our Rivers and Seas Watch page and will continue improving the available information on our website.
Questions and answers
Like all water companies, we collect compliance, spills and pollution data and we supply data to the Environment Agency on an ongoing basis. This data is not finalised with the Environment Agency until the following calendar year. The number of Category 1, 2 and 3 pollution events is included in our pollution reporting.
It’s necessary to carefully investigate what may appear to be pollution events. We often do this in collaboration with others, including the Environment Agency. These investigations may involve reviewing technical information, visiting the location, looking carefully at the watercourse and taking water quality samples.
Pollution incidents have to be categorised based on the level of harm, or potential harm, to the environment in accordance with Environment Agency criteria and procedures. To ensure that published information is accurate, the categorisation of all pollution incidents isn’t finalised by the Environment Agency until the end of the reporting year.
Rivers and Seas Watch helps you stay informed about storm overflow releases across our region.
Where there's some identifiable environmental harm arising from an incident (e.g. a high level of ammonia in a watercourse, detritus in the water, some localised impact on flora or animal or fish health), that is normally dealt with at the time of the event by the response personnel in consultation with the Environment Agency and any relevant local authority. We have a 24/7 incident response team.
Where necessary, immediate remediation measures including re-oxygenating the water, flushing through, sandbagging, litter picking and restocking fish are deployed. In parallel with this, the root cause of the event is identified and necessary actions are taken to avoid recurrence.
Ofwat’s findings in the Penalty Notice were purely about regulatory obligations in respect of which Ofwat has jurisdiction. Ofwat hasn't made any findings about any actual environmental harm or environmental permit failures. These matters are dealt with by the Environment Agency, as the environmental regulator.
We provide information on pollution incidents in our Annual Report and we provide much more detail to the Environment Agency on pollution incidents.
Our Compliance and Pollutions Steering Group looks at all aspects of our environmental compliance and performance. Alongside wastewater treatment works compliance, it also focuses on improving river quality, reducing pollution incidents and flooding, and enhancing bathing water quality. Details of the work being carried out by the Compliance and Pollutions Steering Group can be found in our Annual Report. We've recruited a team of environmental compliance advisors and created environmental champions across our organisation to increase environmental awareness.
The Ofwat Notice refers to spill events occurring over many hours. What does this mean in terms of the environmental impact?
The duration of a spill alone would not be conclusive of whether or not it has had an environmental impact. For example, the spill flow may be low volume (possibly a trickle), and how diluted it is will vary (up to highly diluted). The environmental impact is also related to the state and the size of the environment receiving that spill.
4. The 2021 Environment Agency case
An open letter from our Chairman, Keith Lough
Southern Water has let its customers down.
Over the period from 2010 to 2015, illegal sewage spill incidents occurred which resulted in an Environment Agency prosecution and the £90 million fine we received last Friday [9 July 2021].
What happened during this time was completely unacceptable and we pleaded guilty to the charges in recognition of that fact.
The reality is that Southern Water did not meet the expectations of the customers we exist to serve. We failed to protect our precious environment in southern England. For that we are profoundly sorry and as we have made clear, our customers will not pay a penny towards our fine.
As Chairman of the company since 2019 I do feel this deeply.
I joined Southern Water because I wholly supported and wished to be part of the transformational changes that the new executive leadership was bringing to the business. Ian McAulay joined as Chief Executive in 2017 and immediately set about appointing an entirely new leadership team, delivering root and branch changes to the culture, governance and delivery capabilities of the business.
Since then, the Board and senior leadership have thought long and hard about the kind of company we want Southern Water to be and how we wish to be viewed by our customers, the communities we serve, our regulators and our staff and delivery partners.
It has been a process of deep and necessary cultural change, with measures put in place to completely overhaul our operations. As a result, I am in no doubt that Southern Water is now a very different company.
On governance, we have a new Code of Ethics, have revised our company values, put in place a modern compliance framework and enhanced whistle-blowing procedures.
On environmental performance we are leading the way in our sector when it comes to absolute transparency. Our company website now alerts people to pollution incidents, flow and spill reporting, wastewater treatment works compliance, regional bathing water compliance results, emissions and river levels. We believe that openness and transparency will bring wider stakeholder engagement and lead to the design and delivery of the kind of changes that our customers and communities want. We want these changes too.
We provide essential services and, at our heart, are both an environmental and a customer service business. Our absolute priority is to put the environment front and centre in everything we do. If we continue to do this, we believe we can rebuild trust with our customers and stakeholders. Our ambition is that by 2025 we will ensure our operations cause no serious pollution incidents affecting local rivers, streams and beaches.
Regaining trust takes positive action and will take time. It depends on improving our performance as a business, taking a zero-tolerance approach to pollution and leakage, and continuing to overhaul the way we operate. It does also depend on securing the vital investment, beyond our regulatory determinations, to match our environmental ambitions.
Securing additional investment to deliver for Southern Water customers is critical to underwriting our commitments so I am delighted to confirm that an additional investment programme of £230 million, brought forward by our Executive team, has just been approved by the Board.
This follows the approval of £144 million of improvement business cases last year. Furthermore, the confidence built by improvements in systems and delivery capability in the last few years has also meant the Board has approved the Executive’s request to accelerate £60 million of spend from future years into this year.
In total that means approaching half a billion pounds of accelerated and additional investment committed, adding to more than £3.5 billion of expenditure already committed in our business plan. That will be good for customers and the environment and will enable completion of the transformation of Southern Water, begun in 2017.
Southern Water has so many excellent staff who day-in and day-out work hard for our communities and the environment and I believe that we do all understand what doing the right thing actually means. While I am sorry for what has been, it makes me no less proud of how far we have come since 2017 and even more determined that we deliver on our new commitments to our customers, the environment and economy of the south east.
Keith Lough
Chairman
Published: 14 July 2021
