Water firm backs down on surcharge

Severn TrentMillions of households have been told they will not face a threatened surcharge on bills from water company Severn Trent - weeks after rival Thames Water said it planned to hit customers with an extra £29 payment.

Severn had warned that it and other water suppliers faced additional expenses after they took over the maintenance of private sewers and drains in October 2011 and a review of tariffs was likely to take these into account.

But the FTSE 100 company now says it will not be applying to regulator Ofwat for an interim review of price limits over the 2010/15 period that would have been necessary to pass on bill hikes to consumers.

Operating costs for the adoption of private drains and sewers (PDaS) were £10.4 million for the year to March and £4.7 million for the previous five months.

The company, which supplies 4.2 million customers across the Midlands and parts of Wales, said in a statement that extra investment and costs owing to PDaS for the five-year period "will be absorbed by Severn Trent Water and will not be passed on to customers".

It comes after Thames Water announced last month that it would be asking Ofwat to allow a bill surcharge, largely to cover customer bad debts but also including investment in the Thames Tideway tunnel and private sewers.

The privately-owned company listed the revenue impact of private sewers on bills at £51.1 million, representing a £7.50 chunk of the £29 surcharge. The figures relate to additional costs over 2010/15 during a five-year price control period set by Ofwat.

But there was a terse response from the regulator, which said it would challenge the proposals and "question the company strongly" on the reasons behind it.

Water companies have until September 15 to apply for interim review of the price limits set for 2010/15 but so far Thames Water is the only one to have done so.

The announcement from FTSE 100-listed Severn Trent comes two months after the collapse of a proposed takeover deal by a Canadian-led consortium following the rejection of a £5.3 billion bid.

10 of the biggest consumer rip-offs

10 of the biggest consumer rip-offs