South East Water faces a £22million fine for what regulators have described as “significant failures” in its service.
It comes after repeated supply outages left more than 286,000 homes and businesses without drinking water across Kent and Sussex between 2020 and 2023.
Chris Walters, interim CEO at Ofwat, said: "South East Water's significant failings caused major disruption and had a huge impact on thousands of its customers.
"Not only did the company fail in its duty to provide a water supply to meet the demands of its customers, but it also fell short when it came to providing support for customers who lost their supply. They must do better.
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Thousands were left without drinking water
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"This investigation gets to the heart of the company's supply resilience problems. We want to see South East Water take more responsibility and get on with fixing things for its customers."
Ofwat launched an investigation into the water company after outages between November and January left tens of thousands of households and businesses across Kent and Sussex without drinking water.
South East Water failed to maintain key infrastructure such as service reservoirs, boreholes and major pipes.
It said these issues left the system more likely to fail during “prolonged dry periods” or freeze-thaw events that affected residents in Kent and Sussex on multiple occasions.
As a result of the disruptions, customers had no tap water, were unable to shower or bathe, and unable to flush their toilets, which caused immense stress and anxiety.
The investigation concluded that the company failed to plan properly or learn from past incidents, leaving it unable to cope during periods of high demand or extreme weather.
Ofwat said the investigation found the company’s response was slow, disorganised and poorly resourced, leading to shortages of bottled water, too few tankers on the ground, and insufficient support for vulnerable customers.
In January, industry body Water UK confirmed that South East Water bills would rise by an average seven per cent from April, taking the typical annual charge to £324.
David Hinton, head of South East Water
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The announcement came just weeks after customers endured days of supply disruption, with the company blaming Storm Goretti for burst pipes and power cuts.
It followed a similar crisis the previous month, when 24,000 households in Tunbridge Wells were left without drinking water for two weeks.
South East Water has been led since 2020 by chief executive David Hinton, who receives a base salary of £400,000 and is eligible for an annual bonus of up to £115,000.
The 58‑year‑old, who lives in Farnham, Surrey, was awarded a 30 per cent pay rise last year and also receives car benefits and a generous pension package.
A bottled‑water station had to be set up in East Grinstead in January as residents queued for supplies during the Sussex outage.
Following Ofwat's announcement, a South East Water spokesman said: "We recently filed for judicial review of an Ofwat draft decision and sought an injunction. Following a hearing, the court did not grant the interim injunction. We respect the court's decision on this.
"We are now considering Ofwat's draft decision and will respond via the appropriate channels, ahead of its final decision. We have no further comment at this time."
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