Thames Water could be facing a fine of up to £14.1 million by water sector regulator Ofwat according to the utility’s latest interim report.
In October last year Ofwat wrote to the company saying that its Executive "was minded to make a recommendation" to Ofwat’s Board to issue a formal notice to Thames Water under Section 22A(4) the Water Industry Act 1991. The notice would propose the imposition of a financial penalty of up to £14.1 million for an alleged contravention of Condition J of Thames Water’s instrument of appointment.
The alleged contravention relates to Ofwat’s concerns that Thames Water has misreported its sewer flooding outputs in AMP4 (2005 – 2010), specifically in relation to the 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.
Thames Water said in the Interim Report that while it intends to “vigorously contest” the alleged contravention and any subsequent enforcement action taken by Ofwat, a provision had been recognised in its accounts at the maximum value -£14.1m - of the financial penalty. The issue could also result in a “logging down”* adjustment of Thames Water’s RCV (Regulatory Capital Value) as part of the PR14 determination.
Ofwat is not in a position to comment in any detail at this stage as its investigation is currently ongoing.
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