Regulators have confirmed a £20.3m ($40m USD) fine imposed on Southern Water for poor service and reporting misleading data.
Ofwat first announced the fine in November and confirmed it on Friday after a period of consultation.
It said that Southern Water had systematically manipulated information to hide its true service performance.
Southern Water Chief Executive Les Dawson said: “Today’s announcement draws a line under a shameful period in the company’s history”.
Ofwat said the fine will not be passed onto customers and, instead, shareholders will have to bear the cost.
The misreporting meant that Southern was able to raise its prices by more than it should have done, Ofwat said.
Southern Water uncovered issues with the reporting of its service standards in October 2005, and reported them to Ofwat and the Serious Fraud Office (SFO).
The problems related to response times for billing inquiries and service complaints from customers.
According to Ofwat chief executive Regina Finn:
“Southern Water deliberately misreported its customer service performance to Ofwat and systematically manipulated information to conceal the company’s true performance over an extended period of time.
“The company benefited directly from this misreporting at the last two price reviews, meaning Southern was able to increase its prices by more than it should have done,” she added.
“Customers received higher than necessary bills because of the company’s deception.”
Ofwat noted that Southern Water had taken “prompt” action once it discovered the misreporting and is returning money to customers who paid higher bills than they should have done.
Southern Water said it had repaid more than £500,000 to customers who had lost out and apologised for the misreporting.
The company provides water and sewage services in Kent, Sussex, Hampshire and the Isle of Wight.