Ofwat is making “good progress” and hopes to provide an update “fairly soon” about its investigation into Southern Water, Utility Week understands.
The regulator is considering if Southern breached its “statutory duties and licence obligations” regarding the performance of its wastewater treatment sites and the reporting of relevant compliance information.
Ofwat opened the investigation in June 2017 and publicly announced it in February last year.
The regulator confirmed to Utility Week its intention to update on the mater after a Sunday Times article suggested that the Serious Fraud Office (SFO) could open a new probe into the water company.
A spokesperson for the SFO, which investigates and prosecutes serious or complex fraud, bribery and corruption, said: “We are aware that Ofwat opened an investigation into Southern Water but can neither confirm nor deny interest in the matter.”
Ofwat’s investigation is focused on Southern’s maintenance of sewerage systems, as well as financial and management planning and control.
Southern Water confirmed it has contacted “law enforcement authorities” in relation to Ofwat’s ongoing investigation into the historical performance of the company’s wastewater sites and data disclosure.
A spokesperson for the water company said: “We have been open and transparent about the progress of investigations by our regulators in relation to historical performance of wastewater sites and data disclosure.”
They added: “As we reported in our half-year report to September 2018 published last November, during our cooperation we decided it was prudent to bring this matter to the attention of the law enforcement authorities.
“At this time, we are not in a position to say anything further, but we will continue to cooperate closely with our regulators and will update our customers, stakeholders and investors when all parties involved agree it is appropriate to do so.”
In the November document, Southern stated: “As part of company-wide plans to review and improve our processes, data collection, monitoring, training and culture of transparency, we are working with our regulators to address the specific issues surrounding our wastewater treatment works.”
It added: “We face investigations from the Environment Agency regarding the performance of certain wastewater sites and an investigation by Ofwat into the performance of our wastewater treatment sites and the reporting of relevant compliance information.
“We are working proactively with the Environment Agency and Ofwat to resolve their investigations which are still evolving. At this time, no clarity of the findings of these investigations or further action and associated financial impact, if any, can be quantified.”
When Ofwat announced in February 2018 it was in the process of gathering and reviewing information as part of its investigation it said it would conclude the matter as “quickly” as possible.
Southern has been keen to emphasise the efforts made over the last two years to “take a grasp of its legacy issues”,
Ian McAulay, who was appointed as chief executive in January 2017, has overseen a turnaround and transformation programme, bringing about improvements to corporate governance processes and systems, including the appointment of a new compliance and asset resilience director in April 2017 and a general counsel in July last year, as well as a separation of water and waste services to create a more robust structure reporting to different regulators.
Dr Alison Hoyle, Southern Water’s compliance and asset resilience director has been tasked with reviewing the company’s risk and compliance management and the behaviourial and value aspects which underpin it.
In a recent meeting with Utility Week, Hoyle said: “We are looking at how we do risk management and compliance management but that isn’t always about a lot of the technical things we do, although it’s important we do those well, given what we look after.”
She added: “It’s completely right that we are highly regulated.” Hoyle said the company has been looking at how to move into more “ethical business practice”.
“The behavioural aspects around risk management and relative risk management are about understanding what decisions you can make in a particular point of view and how you can make those and where you might need to go for other advice – whether that is more specialist or because of the circumstance,” she said.
In an interview with Utility Week towards the start of this year, Rachel Fletcher Ofwat’s chief executive confirmed the regulator still has some enforcement cases running, which will be concluded in due course.
She said: “Giving clarity to the industry through enforcement action is important to us, equally pushing forward on our agenda around board leadership and improving the financial ringfence is something companies will see us pushing forward on in parallel with PR19 and you will also see us make progress on the vision for the sector and the strategy for Ofwat.”
“This is a year where we’ve got a huge amount to deliver but we also need to start setting ourselves up for 2020 and beyond and start thinking about how can we be even more effective as PR19 comes to a close,” Fletcher added.