Water sector regulator Ofwat has found that SES Business Water has overcharged customers – despite directing the company in January 2023 to comply with price protection requirements set out in the Retail Exit Code (REC).

The Direction came into effect on 1 April 2023 and has been monitored for two years.

The failure to comply with the requirements which stipulate that charges to customers should not exceed those set out in the REC was identified as part of Ofwat’s routine monitoring of compliance with the REC.

Ofwat has subsequently found further contraventions of the REC with respect to the charging requirements within this two-year period, and therefore a contravention of the Direction issued in 2023.

SES Business Water had incorrectly applied a meter reading cost allowance to the charges for its Group One customers served on assessed tariffs. Group One customers are those that are supplied less than 0.5 megalitres of water or wastewater services a year). This led to 751 customers being overcharged a total of £14,482 across charging years 2023-24 and 2024-25. On average customers were overcharged up to £20.34 across the two charging years.

In addition, Ofwat also identified that SES Business Water had failed to comply with the Group Two price protections in 2023-24 and 2024-25. Group Two customers are those supplied at least 0.5 megalitres of water or wastewater services a year but below 50 megalitres.

SES Business Water then confirmed that it had failed to comply with the Group Two price protections during the two charging years and had consequently overcharged a subset of its Group Two customers. A total of 1,388 Group Two customers were overcharged a total of approximately £52,000 over charging years 2023-24 and 2024-25. On average, customers are due a refund of £37 (around 0.5% of an average Group Two customer annual bill.

The regulator says that in light of proactive steps SES Business Water has taken and is continuing to take to address the breaches Ofwat has decided to accept a section 19 undertaking from the company. As a result, Ofwat is not required to issue an enforcement order to secure SES Business Water’s compliance.

The undertaking sets out the governance steps that SES Business Water is required to complete to ensure it has brought itself back into compliance and will remain compliant with the charging requirements going forward.

The company has undertaken to review and amend the operational structure for how its charging calculations are pulled together and cross checked going forwards into future years to ensure ongoing REC compliance, including:

• Calculations of Tariffs will be performed by the portfolio management (PM) team, at the level the management lead – increasing level of training and knowledge of the underlying subject.
• Once the calculations are drafted in line with the REC, a ‘4-eye check’ will be performed by the PM manager and another equivalent member of the SESB management team.
• Following the ‘4-eye check’ by the PM and any relevant amendments, this will be presented to the Finance Director, the Ops Director and the Managing Director for further questioning, review and then sign off.

The results will then be presented to SESB's board for approval.

The undertaking also includes measures to provide redress to affected customers.

For Group One customers, this includes issuing a refund to all impacted customers, alongside an additional payment of £20 as compensation for the error. In total returning approximately £29,500 to customers. SES Business Water Limited has certified that it has already taken all of the steps outlined in this part of the undertaking and is therefore already complying with these commitments.

For Group Two customers, SES Business Water has recalculated the correct rates for impacted customers, crediting customers the difference in charges and has applied an additional £20 compensation payment. All impacted customers have now received a letter informing them that an incorrect rate had previously been applied and outlining the credit applied to their account.

Ofwat commented:

“Given that these actions have now been completed, these undertakings do not require any further monitoring. Any future breaches of the company’s obligations under the REC will be picked up by routine compliance monitoring.”