Source · Select Committees · Environment, Food and Rural Affairs Committee
Recommendation 13
13
Acknowledged
South East Water has failed to engage with key stakeholders outside the company to help...
Recommendation
South East Water has failed to engage with key stakeholders outside the company to help it learn from its mistakes. It is unwilling to properly listen to its customers, who have repeatedly complained of addressable failures 42 and yet continue to suffer them. The company’s leadership has taken a defensive approach with regulators to the point of trying to obstruct their reports and in so doing mislead credit agencies, demonstrating at best a lack of transparency, and at worst an attempt to actively deceive external stakeholders. This is yet another cultural problem that must be addressed to allow South East Water to account for its own actions. (Conclusion, Paragraph 72) Conclusions and next steps
Government response summary AI-generated
The government acknowledges South East Water's cultural failures by detailing ongoing regulatory actions, including a credit rating downgrade, a licence breach, a proposed £22 million penalty, and placement into a formal Transformation Programme. It stresses that the company must now demonstrate credible leadership and delivery, and highlights increased customer compensation standards.
Summary of the government's response below — read the verbatim text to verify.
Government Response
Acknowledged
HM Government · verbatim extract
Acknowledged
As the Committee will be aware, on the 28 May, Moody’s published their decision to downgrade South East Water’s credit rating to Ba1 (outlook negative). This has resulted in a breach of Condition P26 of the company’s licence, triggering Ofwat’s duty to issue an enforcement order or agree suitable undertakings. South East Water is also subject to multiple ongoing enforcement proceedings via Ofwat and the Drinking Water Inspectorate (DWI). On 5 March 2026, Ofwat proposed a £22 million penalty for South East Water’s supply resilience failures following its investigation into major customer supply disruptions between 2020 and 2023. Ofwat’s consultation on this decision closed on 13 April 2026, and Ofwat are now considering the representations made. In April 2026, the Drinking Water Inspectorate concluded that the Tunbridge Wells incident in November/December 2025 was foreseeable and preventable, citing systemic operational failures, and placed the company into a formal Transformation Programme. Following the major outages in late 2025 and early 2026, in May, elevated temperatures drove increased demand, leading to significant disruption, with around 20,000 properties, mainly in Kent, experiencing intermittent supply. The disruption highlights my serious concern about the company’s resilience under predictable seasonal pressures. South East Water’s performance is clearly below the standard that customers and Government are entitled to expect. Repeated disruption to supply, weaknesses in operational resilience and the company’s ongoing regulatory breaches point to serious and unacceptable failings. The company is funded to deliver the necessary improvements, and it must now show credible leadership, a robust plan and early evidence of delivery. Government is working closely with Ofwat and the Environment Agency to ensure a strong, coordinated response that protects customers and restores confidence. Those affected must also be compensated promptly. Last year we doubled or more the compensation companies must pay to customers when they fail to meet standards, including incidents of supply outages or low pressure, and we also introduced new standards including for the issuing of ‘boil water’ or ‘do not drink’ notices. The incident in Tunbridge Wells was the first time a ‘boil water’ notice had been issued since the introduction of the new standard, meaning South East Water had to make mandatory payments to affected customers.
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