Thames Water could be fined a record £12.5m by industry regulator Ofwat for misreporting and poor customer service.
The water company faces a £11.1m fine for misreporting regulatory information and a further £1.4m fine for poor processes and systems that led to customers receiving unsatisfactory services.
Ofwat chief executive Regina Finn said: "Water is a monopoly business and until we see a competitive market developing, Ofwat must protect customers by regulating the companies' prices and quality of service.
advertisement"To do this we need complete, accurate and reliable information. Misreporting of information damages our ability to regulate the industry and therefore to protect customers."
The news is likely to be cheered by consumer groups which have spent the past year attacking water companies for failing to meet leakage targets while making huge profits.
Water bills have increased by seven per cent this year - well in excess of inflation - to take the average water and sewerage bill to £312 in England and Wales.
The proposed fine follows Ofwat's investigation last year into Thames Water's reporting of its customer service performance.
The regulator said that Thames acted responsibly by informing Ofwat of the misreporting, taking steps to investigate the situation itself, co-operating with the review and reimbursing customers the amount they should have received following poor service by the company in the past.
Ofwat stressed that there is no evidence of fraud by Thames Water, Britain's largest water company, and that the investigation did not find any evidence of deliberate misreporting.
Thames Water said the proposed fine was "totally disproportionate", and revealed plans to challenge it.
Ofwat said: "The proposed fine is appropriate given the seriousness of the misreporting and customer service failures by Thames, while also being fair and proportionate and taking account of the steps Thames has taken to remedy the situation."
Source The Telegraph