Am I missing something?

I'm not sure how you punish underperforming public service companies, but I cannot see the logic in fining them. The latest example is Thames Water which faces a fine of over £12m imposed by Ofwat for poor service to its customers. Of course this means that Thames Water will have £12m less to spend, which doubtless will result in even poorer service to its customers! Can anybody see the sense in that?