The Serious Fraud Office is to bring a criminal prosecution against Severn Trent, the UK's second biggest water company, over alleged misreporting of data on leaks to Ofwat between 2000 and 2002.

Severn, which serves 3.7 million properties in the Midlands, will be charged with three offences relating to leakage data at a magistrates court in the next few weeks. If the company decides to plead not guilty to the charges, a date for trial will be set. No individual will be charged, the SFO said.

The case, which began in 2004 when a former employee blew the whistle on alleged irregularities at the West Midlands water company, could lead to multimillion-pound fines for the UK's second biggest water company. Ofwat alone could fine the company up to £120 million, if it is found that it failed in its responsibilties to its customers and the regulator.

Severn Trent is already facing two other investigations relating to misreporting of data to the water regulator, Ofwat. In April last year, Severn confessed to misstating customer relations data to Ofwat and the regulator has indicated that it will announce a multimillion-pound fine for this offence before the end of the year.

Ofwat is also investigating the misreporting of water leakage data.

Tony Wray, who took over as chief executive of Severn Trent last month, said: "The new board has co-operated fully with the SFO during the investigation. We will now study carefully the details of the charges which relate to the responsibilities of a previous regime."

He added: "This new board and management team has taken, and will continue to take, all actions we think appropriate to ensure the maintenance of both high ethical and professional standards and resilient and effective controls throughout our organisation."

The action against Severn Trent comes as a number of other water companies have been investigated or fined for misreporting data to Ofwat. Misreporting data has an impact on customers' bills, because Ofwat collects these figures and uses them to compare water company performance and ultimately to set price levels.

The Consumer Council for Water has raised the alarm over the number of water companies who are being investigated by Ofwat for misreporting. Thames Water, the UK's biggest water company, has said that it is being investigated for misreporting and last week Southern Water was fined almost £20 million for misreporting. It has since emerged that Three Valleys Water, which serves areas to the north of London, is also being investigated.

Combined, these companies provide service to nearly half of the customers in England and Wales.

Dame Yve Buckland, the National Chair of the Consumer Council for Water, said: “This is very serious as it undermines customer confidence and has an impact on the reputation of the whole water industry.

"The accumulation of cases raises the need to question the accuracy of information being submitted to Ofwat by water companies, on which important regulatory decisions are made.“

Severn Trent has already returned £40 million to customers through a combination of refunds and lower increases in rates, relating to this matter.

The water regulator now has the ability to fine water companies up to 10 per cent of their regulated turnover.

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