The news that Thames Water Utilities is to be fined £12.5M has produced varying responses. What hasn’t been disputed (except by Thames Water) is that the company deserves a thoroughly good kicking for the abysmal service it provides. It’s the fact that the penalty is a fine that is the problem. As stated in Ofwat’s press notice and in Thames Water’s retaliation, the fine goes to the Treasury’s ‘Consolidated Fund’, not to the customers. So think of the fine as a bit of additional taxation shared between Thames Water’s customers and shareholders. It would surely be far more effective if the regulator could impose penalties in the form of forcing the company to do additional enhancements on its water system, or in the form of a cap on the dividend it could pay it’s shareholders.
In complaining about the level of the fine, Thames Water are being, to put it mildly, rather economical with the facts.
We can see no justification for the level of the fines proposed. They are totally disproportionate to any sensible measure of the harm the original GSS payment irregularities may have caused and disregard the steps we have taken to reimburse our customers…. The reporting errors for which we are being penalised took place over a 12-month period from 2005 to 2006, and represent missed payments to our customers of under £500,000.
Whilst that is true, it is apparent from Ofwat’s two notices that Thames Water was claiming, at the highest levels, that there was nothing wrong with compensation payments for missed appointments, when they knew full well that there was.
To put the penalty in perspective, it is less than 2.4% of the amount that Thames Water Utilities paid its shareholders in dividends during the last financial year. The idea that the fine might thus impair Thames Water’s ability to improve its services is, quickly frankly, risible.