A report in yesterday’s Sunday Times newspaper says that Southern Water has alerted law enforcement authorities which are “understood to include the SFO” as part of Ofwat’s ongoing investigations into the operation of some of the utility's wastewater treatment works.

The story made headline news in the business pages of the newspaper which draws attention to what it describes as “ the latest setback for the supplier, which has repeatedly fallen foul of regulators”.

The Sunday Times cites a number of examples, including a Serious Fraud Office investigation in 2006 into whether the water company had misled Ofwat dropped due to insufficient evidence. It also refers to a ruling in December by the Pensions Regulator threatening enforcement action and instructing the utility to pay £50 million into its retirement scheme.

The Serious Fraud Office is a non-ministerial government which is responsible for investigating and prosecuting serious or complex fraud and corruption in England, Wales and Northern Ireland.

Ofwat’s current investigation, in which the Environment Agency is also involved, covers the operation of some of its wastewater treatment works and reporting processes between 2010 and 2017. Southern Water has been providing updates on the situation in response to various requests from investors for an update on Ofwat’s ongoing investigations.

In November 2018 the water company told investors it was “engaging in detailed discussions with Ofwat of its findings and the consequences in relation to serviceability and Outcome Delivery Incentive penalties in respect of AMP 5 and 6.”

Southern Water In its annual report for 2017-18 said it was “working proactively with the EA and Ofwat to resolve their investigations which are still evolving”, commenting:

“It is likely that we will be required to make future revenue adjustments and/or pay penalties and fines in relation to any restated figures and this could include a RCV log down in the 2019 Final Determination.”

The water company also warned in its report:

“The Ofwat investigation could result in Ofwat taking enforcement action which may include the imposition of a financial penalty, which could be material in nature as Ofwat can impose a financial penalty of up to 10% of turnover for each breach. Any penalty or fine will be dependent on a consideration of the severity of the findings of the investigations.”

Southern Water told its investors in November that it had “adopted the prudent course of bringing the matter to the attention of the law enforcement authorities.”

In its latest update this month, the utility said it was currently “still assisting Ofwat with its investigation into legacy issues relating to wastewater compliance.”

“When Ofwat is in a position to be able to conclude and formally announce the outcome of its investigation, Southern Water will be able to share the relevant details and how they will take effect in our AMP7 Final Determination or otherwise.”

The Sunday Times quoted the SFO as saying:

“We are aware that Ofwat has opened an investigation into Sothern Water for alleged breaches.”