Poor Customer Service Cost Company Millions

UK -- Water company lied about customer service performance to win higher price rises from regulator.

The true cost of poor customer service has hit British utility company Southern Water after it has been ordered to pay a record £20million for lying about its customer service performance. The company, provider of water services to 1.8 million households in Kent, Sussex and the Isle of Wight admitted misleading the UK utilities regulator Ofwat about its handling of customer complaints.

Ofwat said Southern Water "systematically manipulated information to conceal the company's true performance over an extended period of time". Concealing the true figures meant the company was allowed to implement bigger price rises. As a result customers paid £13m more than they should have done and were denied compensation they were entitled to because of poor service.

Following the investigation, which has cost Southern Water a staggering £90m, Les Dawson, Southern Water's new chief executive apologised customers. He said: “I am really sorry". He added "I would like to reassure customers that those historically entitled to guaranteed standards payments have now been paid and that we are well on course to meeting a service improvement plan agreed with the regulator."

The company has paid out over £18m in customers refunds to date and spent up to £30m on an investigation by accountants KPMG. Furthermore, it has invested £23m on a new IT system to improve customer service.

Two senior managers were fired and several employees demoted as a result of the findings. Staff had under-reported the number of complaints received from customers, lied about how quickly they were dealt and shredded customer correspondence.

Regina Finn, Ofwat's chief executive, said: "The magnitude of this fine reflects the magnitude of the offence - deliberately misleading the regulator, failing of the Southern Water board of directors to pick up the deception and the resulting poor service to customers." She added "Southern Water's shareholders will bear the entire cost of this fine. It will not be passed on to its customers."

Southern Water is not the first British utility company to fall foul of the regulator. In September, Ofwat fined Thames Water, water supplier to London, £12.5m for failing to provide sufficient customer service and for
misreporting regulatory information. Severn Trent Water is also about to be penalised for failure to meet minimum customer service standards.