Southern Water has been fined £37.7m, but this has been reduced to £3m because the company has undertaken to pay customers some £123m over the next five years.
Ofwat states in its report: "We have concluded that Southern Water has deliberately misreported data to us about the performance of its wastewater treatment works. We have also concluded that it has failed: to have adequate systems of planning, governance and internal controls in place to be able to manage its wastewater treatment works; to accurately report information about the performance of these works; and to properly carry out its general statutory duties as a sewerage undertaker, to make provision for effectually dealing with and treating wastewater."
It is extremely frustrating that this financial penalty will only compensate Southern Water's customers and does not include any funding to clean up the environmental damage that the company has quite obviously caused in both rivers and along the coastline.
Ofwat is only concerned about regulatory obligations over which it has authority, and this does not include scrutiny of Southern Water's environmental permit failures or, indeed, whether its employees behaved criminally in covering up its woeful operating performance.
These issues are currently being dealt with by the Environment Agency, although the Ofwat report suggests that appalling practices were endemic throughout Southern Water's structure "...including at senior management levels" including some designed "to prevent samples of wastewater from being taken at treatment works to check compliance with environmental permit conditions".
Guy Linley-Adams, Solicitor for S&TC said: "S&TC has been pursuing this matter, including through the Information Commissioner's Office for some time now. Given what we now know, it is inconceivable that the Environment Agency will not prosecute Southern Water, and for multiple offences. We expect nothing less.
"There must be no 'deal' made with Southern Water. Quite simply, the company set out to cheat the system, knowing that would harm the environment, and it must both pay for the environmental damage it has caused and be punished for what it has done.
"The entire green lobby - and its lawyers - will be watching what happens now".
S&TC has reported on Southern Water's appalling environmental record before. Although we have no evidence of similar operating practices in other water companies, it is fanciful to think that they are all lily-white in their performance since privatisation. Some £55 billion has been paid to shareholders since privatisation, which would suggest the greatest driver for these companies is profit-sharing among investors rather than any serious sense of responsibility for environmental protection. The damage the water companies cause either from inadequately-treated sewage polluting our rivers or the impacts of excessive water abstraction from rivers and aquifers, is immense.
As we cannot trust water companies any more, the time has arrived to require independent monitoring of all water company's sewage works and abstractions.
S&TC's Head of Science and Policy, Dr Janina Gray, said, "S&TC's recently published Riverfly Census Report highlighted the parlous state of our Southern chalkstreams, which is the freshwater habitat most vulnerable to Southern Water's operations. S&TC is now calling for full independent environmental monitoring of all water company operations in England. It is not an excuse to cite lack of resources for failing to comply with adequate monitoring – it should be a legal requirement for these companies to pay for independent monitoring; they can surely afford it!"
Paul Knight CEO of S&TC UK said, "No-one can be so naïve as to think it is only Southern Water cheating like this at the expense of the environment. This is the direct result of years of cutting the regulator to the bone and relying instead on self-monitoring by polluters. It is time to reverse that trend and require independent monitoring of all large companies that can have such massive impact on the environment".
William Hix, Chairman, Salmon & Trout Conservation commented, "These are shocking revelations which make it difficult for the public to trust Southern Water's treatment of the environment. It is the environment that has suffered as a result of this appalling behaviour, and if the fine is to be dramatically reduced because of undertakings given by Southern Water, then those undertakings should relate primarily to the environment rather than customers.
"OFWAT's statutory duties and strategic priorities and objectives include the environment. The way in which this compromise arrangement with Southern Water essentially compensates customers (rather than the environment) for damage to the environment, reinforces the impression that OFWAT places little weight on the environment. If there is to be a massive reduction in the fine levied in response to undertakings, then those undertakings should relate to expenditure on protecting the environment.
"If trust in the environmental protection activity of Southern Water is to be restored, then an effective system of independent monitoring of Southern Water's emissions to the environment must be put in place as a matter of urgency. Financing such a system, rather than refunding customers, would be the appropriate course to take in accordance with OFWAT's and Southern Water's duties to the environment and the nature of the failures."