Water companies were under fire again today for failing customers: Ofwat said it would fine Thames Water for failing customers and the Serious Fraud Office is to launch a formal criminal investigation into Southern Water for misleading regulators.

Thames, which has already been hit with a £150 million penalty to improve its disasterous record on leaks, will now be hit with a fine of up to £140 million for failing to achieve customer service performance standards set out in the Guaranteed Standards Scheme.

Ofwat said the investigation is continuing into Thames, which has been put up for sale by its German owners RWE with an estimated value of £1 billion.

Philip Fletcher, Chairman of the Water Services Regulation Authority, said: "From the evidence we have seen it is clear that Thames Water has failed to meet the GSS performance standards. The failures were within the company's control, and some customers have not received the standard of service to which they are entitled. As a result customers' interests have been damaged.

"It is extremely disappointing that we have had to take this action against Thames Water for its customer service failures, coming on top of the company's breach of its leakage target. This is a clear warning to Thames Water that it must be focused on delivering the services that customers have paid for."

Water companies are obliged to log when their service fails a customer and when the customer receives payment for the inconvenience of the failure.

Ofwat said it will detemine the level of the Thames fine on completion of the probe, but it may impose a maximum penalty of up to 10 per cent of the turnover of the company's total sales from water and sewage services. That would amount to as much as £140 million.

Meanwhile Southern Water said today that the Serious Fraud Office will launch an investigation into the company for misleading regulators over its customer service standards.

The privately-held company, whose biggest shareholders include the Royal Bank of Scotland, already faces a fine from UK

water regulator Ofwat for supplying incorrect figures.

Southern Water told Ofwat and the SFO last year that it had uncovered discrepancies during the installation of a new customer billing system.

Southern Water’s Chief Executive Les Dawson said in a statement: "We launched a joint inquiry with Ofwat. As a result of information gathered during the course of this independent inquiry and subsequently passed to the SFO, they have now advised us they will carry out their own formal inquiry."

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