South East Water must spend £30.5m on improvements after supply interruptions hit thousands of its customers across Kent and Sussex.
Water regulator Ofwat said this follows the conclusion of three investigations into the company’s repeated failures.
The redress package will be paid for by the firm’s shareholders and not through customer bills.
A spokesperson for the water company said they were “incredibly sorry” for the historical supply disruptions for Kent and Sussex customers.
“We know this caused significant disruption and anxiety, and we accept the failures identified by Ofwat,” they said.
“It is not the standard of service our customers deserve.
“Our priority has been to ensure that the resolution of this investigation directly benefits those who suffered the most.”
Ofwat says the redress will include £5m to provide free water butts for households, £5m to bring forward smart metering to businesses and other non-household customers, and a further £5m for on-site storage to help manage the supply during peak demand.
