In a board meeting on March 28, the regulator “agreed in principle” to issue a draft penalty notice on Thames Water.
Ofwat delegated its chief executive Cathryn Ross to engage with Thames Water on a possible early resolution of the case.
However, if an early resolution is not a viable option, the board agreed that Ross would publish a draft penalty notice.
Thames Water first announced in November that it had set aside £14.1 million for the fine, which relates to the alleged mis-reporting of its work to protect customers’ properties from sewer flooding.
The company said it would “vigorously contest” the alleged contravention and any subsequent enforcement action taken by Ofwat.
The allegations relate specifically to a number of properties reported as having been removed from the register of properties at risk of sewer flooding in the firm’s 2010 June Return.
A Thames Water spokesperson said: “We await its final decision although the regulator has acknowledged that any concerns it had regarding our reporting in 2005/2010 in this area have been rectified.”
Thames says that any fine imposed would be borne by shareholders and would not come from customer bills.