Ofwat has acceptsed a £30.5 million South East Water undertaking to improve its performance in lieu of a £22.46 million financial penalty.

In November 2023, the regulator opened an enforcement case against South East Water to investigate whether it had failed to develop and maintain an efficient water supply system. This followed engagement with the company, including a meeting in summer 2023 with Ofwat’s Chair and Chief Executive, seeking explanation of its poor performance over the prior 18 months.

In March 2026 Ofwat published for consultation details of the investigation’s findings and its proposal to impose an enforcement order and financial penalty on the company. Following a consultation on its proposed decision, South East Water submitted formal undertakings to Ofwat under the Water Industry Act 1991 (WIA91) with respect to this and two separate parallel investigations.

Ofwat has now published its final decision for this case, which concluded that South East Water has breached:

• Its duties under WIA91 by not maintaining an efficient and economical system of water supply within its area and not ensuring that all such arrangements were made for providing supplies of water to premises in that area and maintaining, improving and extending water mains and other pipes.
• Its Licence Condition P12 in relation to acting in the manner best calculated to ensure that it had in place adequate financial resources and facilities, management resources and systems of planning and internal control to meet its duties under section WIA91 and the Security and Emergency Measures (Water and Sewerage Undertakings and Water Supply Licensees) Direction 2022.

Ofwat said it has decided to accept the undertakings as it is satisfied that water company is taking the steps Ofwat considers to be “appropriate and necessary to bring an end to these breaches and secure the company’s compliance.”

Ofwat also decided that it would be appropriate to accept the undertakings in lieu of the financial penalty it would otherwise have imposed in this case (£22.46 million, 8% of the company’s relevant turnover).

The redress package provided by South East Water in the undertakings (which covers both this case and the customer care investigation) is valued at £30.5 million and will be entirely funded by the company and its shareholders, rather than customers.

The redress package will deliver:

A Community Fund to provide support for charities, community groups and not-for-profit organisations in areas in the company’s Eastern region that have been impacted by significant supply failures (£1.5 million).

A series of on-site water demand management measures to improve water storage and resilience for vulnerable sites, household and non-household customers and reduce the risk of supply interruptions (£16 million).

The delivery of activities that will form part of a Remediation Plan following a review by an Independent Reviewer the company will develop to secure its compliance (£13 million).

As part of its remediation activities the company must deliver to secure its compliance, South East Water will also:

Undertake a review of vulnerable sites within the company’s area to better understand their support needs and reflect those in its emergency plan.

Commission an Independent Reviewer (following approval of that reviewer by Ofwat) to review and make recommendations on the company’s processes and approach to root cause analysis in relation to supply resilience and response to interruption incidents, its proposed approach to reviewing its hydraulic models. This will inform the company’s preparation of a Remediation Plan to secure its compliance, for approval by Ofwat.

Develop, for approval by Ofwat, a Management Plan for putting place measures that ensure necessary analysis is conducted and such information is provided to its executive management team and Board to enable them to review and challenge the company’s progress in delivering the Remediation Plan and its compliance performance.

Ofwat will monitor South East Water’s delivery of the undertakings.

South East Water - "We are incredibly sorry for historical supply disruptions that affected customers”

In a statemet issued in response to Ofwat’s decision, a company spokesperson said:

"We are incredibly sorry for the historical supply disruptions that affected our customers across Kent and Sussex. We know this caused significant disruption and anxiety, and we accept the failures identified by Ofwat. It is not the standard of service our customers deserve.

“Our priority has been to ensure that the resolution of this investigation directly benefits those who suffered the most. By working in collaboration with Ofwat, we have agreed to a £30.5 million redress package, which will be wholly funded by South East Water’s shareholders. Choosing this route over a standard fine means these significant funds will directly benefit those customers who were impacted, some of them on multiple occasions….

“We are fully committed to learning from the past, transforming our business and delivering our largest-ever investment programme through our Price Review 24 (PR24) business plan. We are focused on sustainably expanding our network resilience and drinking water storage capacity so that we can prevent these failures from happening again."