Severn Trent was today fined a record £35.8 million for lying to the industry watchdog and providing poor service to its customers.

See also: Severn Trent profits boom

The penalty, which equals three per cent of the company’s turnover, is for misreporting customer service data to the regulator Ofwat in 2005 and earlier years, as well as “substandard” service.The huge fine came on the day that Severn Trent was due to plead guilty at the City of London Magistrates Court to two charges related to reporting false leakage data to Ofwat in 2001 and 2002.

This is the result of a separate Serious Fraud Office inquiry.

Ofwat chief executive Regina Finn said: “Severn Trent’s behaviour was unacceptable. The company’s actions also resulted in customers paying higher bills than they should have done.”

Severn Trent, which employs 1,300 people in Birmingham and Wolverhampton, said today it was lowering bills by £2.40 per household to ensure it had not profited from the episode.

Its customer service department deliberately misreported some of its data to hide its true performance in 2005 and in earlier years, said Ofwat.

It meant services to its 3.7 million household and business customers was not only way below what it claimed but was in some cases below the legal minimum.

Ofwat said the company’s shareholders would bear the entire cost of the proposed penalty, adding: “It cannot be passed on to its customers.”

Chief executive Tony Wray said the misreporting took place under Severn Trent’s previous management.

He said that his new team had alerted Ofwat to the misreporting after uncovering it in 2005.

He said: “We deeply regret the mistakes of the previous regime.”