07/03/2006

Customers to receive refund from Severn Trent Water

Customers of Severn Trent Water are to receive refunds after an investigation by Ofwat found the water company had overcharged customers.

The regulator's investigation found that the water company, which has more than eight million customers, had provided regulatory data that was either "deliberately miscalculated" or "poorly supported". This had led to prices limits being set that were "higher than necessary", which would have resulted in customers paying £42 million more by 2009-2010 - an equivalent of between £2 and £3 each year on an average household customer's bill.

Following the investigation, Severn Trent Water has agreed to reduce its price limits to return the £42 million to customers. The company will return £7 million of this in bills currently being sent to customers, while the remainder will be returned to customers over the next three years of the current price review period.

Philip Fletcher, Director General of Water Services, said: "Customers have the right to expect companies to maintain the highest governance standards, including effective processes and controls at all times. Severn Trent Water's approach fell significantly below these standards.

"I view very seriously the findings and the conclusions we have drawn from our investigation. I have had to take the unprecedented step of alerting the Serious Fraud Office to certain issues. The poor practices we identified at Severn Trent Water cannot be remedied simply by the company returning the £42 million to its customers."

"We will require Severn Trent Water to implement a number of measures to satisfy us that we can in future rely on the regulatory information it reports to us."

Sir James Perowne, Chairman of the Consumer Council for Water Midlands, said that their primary concern was that consumers were reimbursed for any overcharging. He said: "However, we are still seeking reassurance on behalf of consumers about the reliability of water company data supplied to the regulator. It is essential that all information which companies submit to Ofwat is accurate because levels of service, funding for future projects and the level of bills are shaped by it."

Severn Trent Water has apologised "unreservedly" to customers for the processes, which led to price limits being set too high.

(KMcA/GB)


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