Southern Water has been told by Ofwat that it will be fined

The company launched a joint inquiry with Ofwat in March after finding that about 100,000 customers had not been paid compensation they were due.

It has now been revealed that the SFO will also investigate.

Responding to the inquiry, the Consumer Council for Water (CCW) said it wanted to ensure customers did not suffer.

In a statement, the CCW said it had urged Southern Water to reimburse customers who had missed out on compensation payments as a result of data irregularities.

Richard Sturt, CCW regional chairman, said: "These are very serious allegations and the SFO must complete its investigation before we know the scale of the impact on consumers."

Fine expected

He said the CCW was working with managers at Southern Water which was putting efforts into making complaint-handling more effective and to compensate customers who had suffered in the past.

After the mistakes were found in March, the company was told by Ofwat that it would be fined.

It was revealed the firm could be fined up to 10% of its annual turnover.

Under its licence from Ofwat, Southern, like other water utilities, is obliged to pay customers �25 if, within 10 days, it has not responded to a written complaint or enquiry sent in by letter or e-mail.

The company had been telling Ofwat that the standard had been complied with 100%.

But when a new billing system was introduced last autumn, it became clear that about 100,000 customers had not been paid the compensation they were due and the company called in Ofwat and the SFO.