Climate and science news from the British Broadcasting Corporation.
South West Water is being investigated over its treatment of sewage.
Five other water companies in England and Wales are being investigated.
According to the Environment Agency, raw sewage was discharged into waterways 350,000 times.
South West Water said it was paying attention to the decision.
There is a serious risk to health and the environment.
Areas of England that are popular with swimmers and surfers are covered by the South West water.
There are investigations into several water companies.
People in England and Wales report seeing sewage in rivers, canals and along the coast.
Condoms, toilet paper, and even feces can be seen in the water.
"As we gather and analyse more information, including data on storm overflow spills, our concerns have grown further about South West Water's operation of its wastewater assets and environmental performance."
He said that the scale of the issue so far was "shocking" and that Ofwat had never acted on this scale before.
South West Water would work with Ofwat in an open and transparent way, according to a company spokesman. The biggest environmental programme in 15 years was recently announced by the company.
South West Water said this will reduce our use of storm overflows, maintain our region's excellent bathing water quality standards all year round and remove our impact on river water quality by 2030.
"This kind of practice has become business as usual in the water sector," the charity said in a statement.
A chemical cocktail is running through all of England's rivers.
Water companies can be fined 10% of their yearly income.