Severn Trent has been named as one of three water companies not meeting its targets in reducing water leakage from its pipework.
But the company claims that the figures, released by Ofwat, are higher than previously recorded because the leakage had been mistaken for customer usage and other changes in data recording.
An independent investigation is to be carried out and details of the report will be known in the autumn.
Sir James Perowne, chairman of WaterVoice - part of Ofwat - said: "Severn Trent has explained the revisions in the way leakage is calculated".
Scheme will save water...
ONE million gallons of water could be saved every day as Severn Trent begins to install a state-of-the-art leak detection system.
The £2.6 million scheme will see thousands of water meters along the company's network installed with monitors sending daily text messages to water engineers.
Network manager Martin Kane said most leaks are underground and difficult to track.
"The new monitoring system will report daily on what is happening in its area, allowing us to track potential invisible leaks much more quickly."
Domestic meters are not affected by the new system, which will be fully operational within weeks.
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