Ofwat enforcement, 2017–2026

analysisOfwat formally investigated Southern Water from June 2017 for breaches of licence conditions and statutory obligations. In its final decision, published on 10 October 2019 (press notice PN 21/19), it found that the company had failed to operate a number of wastewater treatment works properly, including by not making the necessary investment in time, leading to equipment breakdowns and unpermitted spills, and that it had manipulated wastewater sampling processes, misreporting the performance of a number of sewage treatment sites and so avoiding penalties under Ofwat's incentive regime. Ofwat stated that its findings concerned regulatory obligations only: it made no findings about environmental harm, site-specific permit failures or whether the company's acts were criminal, which were matters for the Environment Agency. The decision followed a consultation on a package of rebates and undertakings that Southern Water itself proposed and that Ofwat accepted; Ofwat's chief executive said the company was "committed to putting things right". Under the decision Southern Water was to pay £126 million in penalties and rebates: £123 million returned to existing and former wastewater customers — £91.2 million of underperformance penalties it should have paid under the price review incentive regime and £31.7 million of additional compensation in lieu of a greater fine — and a fine of £3 million. Ofwat reduced the fine from £37.7 million to £3 million in recognition of the company's remedial steps and proposed rebates. It said the package equalled 6.7% of the company's wholesale wastewater turnover, the largest proportion it had imposed, and that existing customers could receive an average bill rebate of about £60 over five years. The company also committed to greater transparency and to stronger assurance on paying bonuses, and became bound by formal undertakings. The Environment Agency later described the package as a £126 million penalty imposed on the company in 2019 for regulatory failings over the same period as the 2010–2015 offences sentenced in 2021. The 2020–21 annual report of the company's then parent group described the customer rebates as reflecting the seriousness of the breaches identified in the investigation, and the undertakings as measures to ensure that the issues identified had ceased and could not be repeated. ^{1 2 3}

analysisThe section 19 undertakings were signed on 9 October 2019. In its November 2022 conclusions on the change of control of Southern Water, Ofwat stated that the company must continue to comply with the undertakings it gave in 2019 after Ofwat's enforcement investigation into its operation of wastewater treatment works and associated regulatory reporting. Ofwat's February 2026 notice records that the monitoring period of the undertakings ran to October 2024 and that Southern Water complied with the specific actions they contained. ^{1 2}

analysisSouthern Water's annual report for the year ended 31 March 2026 gives the company's account. It states that Ofwat's investigation into the management, operation and performance of the company's wastewater treatment works concluded in 2018–19 — Ofwat published its final decision on 10 October 2019 — with a financial penalty of £3.0 million, and that the company agreed direct customer rebates of £122.9 million in 2017–18 prices over 2020–25, whereas Ofwat's 2019 notice gave £123 million of customer returns in total. The report adds that the related provision was fully released in the year to 31 March 2025 and that Ofwat has now released the 2019 undertakings. ^{3 4}

analysisIn November 2021 the Environment Agency and Ofwat launched an investigation into the sewage treatment works of all combined water and wastewater companies in England and Wales. Ofwat did not open a separate enforcement case against Southern Water in 2022 or 2024, when it opened cases against other companies, because it was still monitoring the 2019 undertakings, but it kept the company within the sector-wide investigation. Southern Water's 2025–26 annual report states that Ofwat has concluded its investigation into the company with new undertakings and no financial penalty, and that all combined companies remain subject to the ongoing Environment Agency investigation, for which the company cannot yet reliably estimate any obligation. ^{1 2}

analysisIn February 2026 Ofwat issued a notice under section 19(3) of the Water Industry Act 1991 accepting enforceable undertakings from Southern Water, dated 3 February 2026, to secure its compliance with Regulation 4 of the Urban Waste Water Treatment (England and Wales) Regulations 1994, section 94 of the Act and Condition P12 of its licence. Ofwat concluded that, despite progress under the 2019 undertakings, the company was not yet fully compliant and was still failing duties on the performance of its wastewater treatment works and collecting systems, effectual drainage and the running of its business. It also found that the company's senior management and board had concentrated on metrics that did not reflect its full compliance with the 1994 Regulations. In giving the undertakings, Southern Water accepted that it had breached its duties under Regulation 4(4), Regulation 4(2) and Schedule 2 of the 1994 Regulations, its general duty under section 94 of the Act by systemically breaching those duties, and Condition P12 of its licence on the adequacy of its resources and systems of planning and internal control. It acknowledged Ofwat's findings in the undertakings; in its response of 6 October 2025 to the draft assessment it had said that it broadly agreed, but disagreed with some aspects, in particular the requirement for an investigation when a site meets less than 108% of its flow-to-full-treatment level. Ofwat accepted the undertakings instead of imposing an enforcement order and decided that a financial penalty was not warranted, citing the company's progress during the 2019 undertakings period and the penalty framework applied in its sector-wide wastewater investigation. The undertakings include a commitment by Southern Water and its shareholders to £13.5 million of additional investment, not funded by customers in the 2025–30 price control and not subject to cost sharing, including £2 million of new activity committed in response to the breaches. The company's annual report for the year ended 31 March 2026 states that Ofwat has concluded its investigation into the company, that a new set of undertakings was agreed and that no financial penalty was imposed. ^{1 2}

analysisOn 5 November 2025 Ofwat reported that Southern Water was one of six water companies that had triggered its new rule prohibiting directors' performance-related pay for 2024/25 — a rule introduced in June 2025 under powers in the Water (Special Measures) Act 2025 — and that all six had complied by not giving their directors an annual bonus or other relevant performance-related pay. Ofwat gave the triggering reasons for the six companies collectively ("a variety of performance failures, mostly involving category 1 pollution incidents") and did not say which standard Southern Water triggered. ¹