To find out more about why we're making amends, read the additional information below.
In 2017, our Chief Executive Ian McAulay was appointed and immediately met with Ofwat to discuss the issues we were facing, after 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.
We immediately started our own internal review and 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 our own review have been shared with our regulators. In October 2019, Ofwat’s investigation resulted in a notice to take enforcement action against us.
How we’re making amends
For our customers
In October, Ofwat issued us with a financial penalty of £3 million. In addition, 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.
To our ways of working These breaches occurred as a result of failures of people, processes and systems. We’ve acted promptly and decisively to make sure all of the issues identified in the investigation have been addressed:
Fundamental changes to the way we operate – Over the past two years these changes have included a full company restructure, a new executive team and a strengthened Board. New ethical processes – We have also put new systems in place to safeguard our services, our whistle-blowing procedures have been enhanced, and a revised set of company values have now been embedded. We’ve also introduced a modern compliance framework, and you can follow the link to read our new Code of Ethics.Greater transparency on our environmental performance – Information that is available on pollution incidents, flow and spill reporting, wastewater treatment works compliance, regional bathing water compliance results, emissions and river levels will be published on the company website (this is subject to any constraints on reporting environmental information or data that is provided to us by the Environment Agency). We’ll report this on our website from March 2020. Follow the link to find out more about our plans to provide greater transparency on our environmental performance.Bonuses and incentives – If we fail to meet our relevant wastewater performance commitments, employees will not receive bonuses and incentive payments for personal objectives linked to wastewater compliance.
In 2017–18 prices.
Chief Executive statement
Since June 2017, our wastewater treatment compliance has been under investigation by Ofwat due to breaches of our licence conditions and statutory obligations during the period from 2010 to 2017.
We have fully supported these investigations and completed our own internal review, which has highlighted failures of people, processes and systems during that time.
We are profoundly sorry for these failures and have been working very hard to understand past failings and implement the changes required to ensure we better deliver for our customers and meet the standards they deserve.
Ian McAulay Chief Executive
On 8 October 2019 we signed the formal undertakings pursuant to Section 19 of the Water Industry Act 1991 relating to the numerous changes we have put in place, and are putting in place, to ensure that the issues identified in the Ofwat investigation have been stopped and cannot be repeated.
As well as the plans to make financial reparations to current and eligible former customers, we have committed to implement a suite of improvements in relation to the development and embedment of strengthened wastewater operational compliance; organisational compliance; culture change measures and a reinforcement of our governance arrangements, in order to prevent recurrence of the events identified by Ofwat.
Our progress against some of the key deliverables are detailed below:
• We have put new systems in place to safeguard our services and ensure we meet the high standards our customers and regulators expect.
• We have visited all of our wastewater treatment sites to identify compliance issues and developed plans to fix and resolve these.
• We have strengthened the controls on the wastewater sampling programme with a focus on ensuring that the breaches (No Flows) do not happen again.
• We have developed a programme of training and are currently focussed on delivering the first modules to our wastewater operators. This is providing the knowledge and skills to empower them to operate their sites competently and with full awareness of their regulatory and permit conditions.
• We have committed to deliver cultural change initiatives, including a step change in mindset, skillsets, productivity, operational performance, ethical principles and practices, and employee engagement.
• Our whistle-blowing procedures have been enhanced and a new set of company values have been embedded. These actions, along with a modern compliance framework, are already successfully changing the culture in Southern Water.
• We completed a refresh of our organisational values in 2019, and have been embedding the revised values across the business. In the same year we also launched our new Code of Ethics, a key element of our work to support ethical business practice. We have worked with the Institute of Business Ethics to develop training material which we have used at workshops.
• We have committed to improve our transparency on environmental performance including pollution incidents, flow and spill reporting, wastewater treatment works, final effluent compliance, regional bathing water compliance results, emissions and river levels.
• We will ensure that employees will not receive bonuses and incentive payments for personal objectives linked to wastewater compliance should Southern Water fail to meet its relevant performance commitments. Compliance with the Section 19 undertakings is subject to a formal assurance regime which will be independently externally assured and reported to both our Audit Committee and to Ofwat on a regular basis. The first and second rounds of assurance confirmed our compliance with the undertakings, and that we had made good progress so far against our plans and in delivery of the undertakings. Progress of these actions was reported to Ofwat in February and August 2020.