Water privatisation gone wrong ...

Excerpt from Sydney Morning Herald:

Thames in hot water

The British regulator has find the water company controlled by Macquarie Bank almost $29m, writes Graeme Wearden

1 October 2007

The Macquarie Bank-controlled British water company Thames Water has vowed to fight a £12.5 million ($28.8 million) fine proposed by the industry regulator for failing to provide accurate information and offering a sub-standard service.

On Friday, Ofwat said it would dock the company £11.1 million for supplying it with inaccurate reports, and £1.4 million for failing to provide its customers with an acceptable service.

"The size of the fine reflects the seriousness with which we see this situation," an Ofwat spokesman said. He explained that Thames Water's reporting errors had hampered Ofwat's ability to regulate the water market properly.

Thames Water claimed the fines were "totally disproportionate" and would have a detrimental effect on its customers in London and south-east England. "We can see no justification for the level of the fines proposed," the utility's chief executive, David Owens, said.

Thames Water had already taken steps to compensate customers who suffered from its failure to meet guaranteed service standards, he said.

"What particularly concerns us is this large sum of money could be spent directly on improving services to customers, but the only benefit will be to the Treasury. This makes little sense," Mr Owens said.

A spokeswoman for Macquarie Bank, which led a successful £8 billion consortium bid for Thames Water in December, said the fine related to issues that predated the takeover.

In its ruling, Ofwat said Thames Water's processes and systems meant customers got poor service and missed out on payments they were entitled to. The utility said the missed payments amounted to less than £500,000.

Ofwat said the fine would have been larger if Thames Water had not acted promptly by admitting the problem. Mr Owens, though, said he was determined to have the penalty reduced.

"We have demonstrated, from our actions to date, that we not only accept responsibility for the errors, alerting Ofwat as soon as we became aware of them, but have also voluntarily taken all appropriate steps to investigate and rectify the failings and to compensate customers over and above the statutory requirements," he said.

"We are therefore asking Ofwat to reconsider the proposed penalty and will be preparing a submission to the consultation in support of that aim."

The Conservative Member of the European Parliament for London, Syed Kamall, welcomed the proposed fine and said Ofwat had been too lenient on Thames Water.

"In a monopoly situation we need a strong regulator with sharp teeth that they are not afraid to use. Londoners will be pleased to hear Ofwat is finally prepared to flex its muscle," Mr Kamall said.

"Thames has been mending its pipes, but now it must mend its ways too."

Thames Water has until October 29 to file an objection to the fine.

See - Privatisation gone wrong.