Leaking pipes may land bill
Water giant Severn Trent, which is unable to supply tens of thousands of customers because of the floods, could be hit by a multi-million pound penalty this week for failing to deal with leaks from pipes. Water giant Severn Trent, which is unable to supply tens of thousands of customers because of the floods, could be hit by a multi-million pound penalty this week for failing to deal with leaks from pipes. But while the water industry regulator Ofwat can impose a fine of 10 per cent of Severn Trent's turnover from water services, it is understood to be seeking an agreement for the Birmingham-based company to pay an even greater amount to replace the leaking pipes. If that option is taken up, it will see customers benefit rather than the Treasury. Read the full story in the Express & Star
But while the water industry regulator Ofwat can impose a fine of 10 per cent of Severn Trent's turnover from water services, it is understood to be seeking an agreement for the Birmingham-based company to pay an even greater amount to replace the leaking pipes.
If that option is taken up, it will see customers benefit rather than the Treasury.
But any spending is to come from shareholders' reserves and not through increased prices.
Ofwat was reportedly planning to reveal leakage figures for the UK's water companies today, but delayed the announcement partly because of the flooding disaster that has devastated parts of the country.
That included the closure of Severn Trent's water treatment plant at Mythe, just outside Tewkesbury, after it had been inundated by the floods.
Litres
Severn Trent responded to the emergency by handing out millions of litres of bottled water and rolling out tankers across a wide area.
The regulator had told Severn Trent to reduce its leakages by almost 600 million litres.
The company reacted by raising its five-year capital expenditure programme from £184 million to £231 million, and last year spent an extra £20 million to lift the number of leaks fixed by 8,000 to 38,000.
But the company still missed its target until March this year, meaning an "insufficient" annual reduction for the year to June.
Ofwat could impose a fine of more than £50 million, but the extra it could demand is spent on pipe replacement could be double that.
Thames Water faced a similar punishment last summer for missing leakage targets, agreeing to replace an additional 230 miles of pipes at a cost of £150 million -Êmore than twice the fine Ofwat could have ordered.
