Northumbrian Water has agreed to pay out £15.7 million after failures in the maintenance and operations of its sewage and water network.
Water sector regulator Ofwat said the firm will pay out the “enforcement package” to local environmental causes and improvements to the region’s water infrastructure.
Bosses at the watchdog said its failures led to “excessive spills from storm overflows”.
It comes a week after Thames Water was fined a record £122.7 million after it was found to have broken rules over sewage treatment and paying out dividends.
Ofwat said the enforcement package is “greater than the penalty which would otherwise have been imposed” if it had fined the business.
It also said the package agreed with the company means it will be spent on local improvements for customers, rather than being directed to the Treasury’s consolidated fund.
Northumbrian Water chief executive Heidi Mottram said: “We agree with Ofwat’s announcement that the financial settlement will be directed into speeding up our storm overflow reduction plans and in meaningful local initiatives via our Branch Out fund.
“This investment, which will come entirely from Northumbrian Water shareholders and will not be paid for by customers’ bills, will enhance our ongoing efforts to support local communities and protect and improve the natural environment here in the North East.”
Lynn Parker, senior director for enforcement at Ofwat, said: “Our investigation has found failures in how Northumbrian Water has operated and maintained some of its sewage works and networks, which has resulted in excessive spills from storm overflows.
“The contraventions we have found at some of their sites will have had an impact on the local environment and customers and it is unacceptable.
“We are pleased that Northumbrian Water has agreed this package.
“We now expect them to move at pace to correct the issues our investigation has identified.
“We hope more companies will follow this example so that the public sees transformative change across the sector.”
Northumbrian Water said in December last year that it plans to increase its average water bills by around 21% over the next five years.