Following the publication of Ofwat’s findings against Southern Water for sewage treatment failures which resulted in a record £126 million penalty for the utility, Chief Executive Rachel Fletcher has described it as a dark week for the water industry.
The water regulator has now written to the Chief Executives of water companies in England and Wales asking them to consider how confident they are that the events in Southern Water could not happen in their own company.
The question was among a number of issues Fletcher has suggested water company Boards should explore in the wake of Ofwat’s investigation, saying that while she did not want to believe the culture that existed in Southern Water was representative of the sector as a whole, “none of us can afford to be complacent.”
She also asked them to address whether Ofwat’s findings against Southern Water, and the public reaction, were widely understood across their business by everyone in the company from Board Director down.
“The publication of our findings against Southern Water for sewage treatment failures, and the deliberate misreporting of its poor performance from 2010 to 2017, rightly met with shock and anger from the public and the wider sector”, the letter says.
Questions Ofwat now expects water company Boards to consider, if they have not already done so, include:
- How does your Board test that the governance and assurance arrangements you have in place give you the right information about your performance?
- What do you do to encourage an appropriate culture in the organisation as a whole?
- How do you encourage your people to speak up if something is wrong?
- What are you doing to allow your stakeholders and especially those in the communities you serve, to help you understand the impact you are having? For example, could you provide more open access to raw performance data?
- Are you and your Board plugged in to what influencers and customers are saying on social media?
- Are you making it easy enough for local groups to have a two way dialogue with you about their concerns?
The Ofwat Chief Executive went on to conclude with the following warning to water company chiefs:
“Our action this week sends a message to the whole sector that we will not tolerate companies that show scant regard for their responsibilities to customers and the environment. Companies should expect us to step up the sanctions we impose for breaches of this nature.”
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