THE water industry regulator is proposing to fine Severn Trent Water £35.8 million for what its own chief executive called "poor" customer service.

Ofwat has taken the step after the water giant, which serves Wyre Forest, misreported customer service information and provided a sub-standard level of customer service.

Severn Trent will be fined £34.7 million, or 2.9 per cent of its 2006-07 turnover for the misreporting and 0.1 per cent, or £1.1 million, of 2005-06 turnover for failing to meet customer service standards.

It follows a decision by Severn Trent to plead guilty, today, to two water leak-related charges following an investigation by the Government's Serious Fraud Office.

Tony Wray, the water company's chief executive, said: "When my new management team and I uncovered misreporting and poor service in our customer relations department we immediately alerted Ofwat and took steps to implement proper controls and an ethical working culture with the highest standards to ensure there can be no repetition of this unacceptable behaviour.

"Without waiting for Ofwat's conclusions we are lowering bills for customers by £10.6 million, around £2.40 per household, to ensure we have not profited in any way.

"We fully acknowledge and accept that the company is responsible for its past failures.

"Now that we have received the notices from Ofwat setting out the proposed level of penalties and the reasons for them, we will carefully consider them and will respond appropriately.

"There is no doubt that the previous regime and culture in place during the era from 2000 to 2004 was overly bureaucratic and lacked sufficient controls and procedures.

"Those who were responsible for the customer relations mistakes are no longer with Severn Trent and we apologise to our customers for their failings.

"Severn Trent's 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.

"A comprehensive root and branch reorganisation of Severn Trent Water has been completed since I became Managing Director in March 2005 and, now, as Chief Executive of Severn Trent, I and my new management team are determined to continue to drive improvements in all our activities for the benefit of all our customers and other stakeholders."

Speaking about the SFO investigation into water leak data handed to Ofwat in 2001 and 2002 , Mr Wray said he "deeply" regretted "the mistakes of the previous regime."