Water company escapes fine for missing leakage targets - 10 August

Severn Trent Water escaped a fine yesterday for missing targets on leakage but agreed to spend an extra £45m to fix leaks and cut bills by £12m.

The water company was the only one in England and Wales that failed to meet the leakage targets set by Ofwat, the water regulator. Rather than fine the company, Ofwat said Severn Trent, which missed its target by 8m litres a day, had agreed to spend an extra £45m over the next three years on replacing old water mains. The company said it would also raise its customers' water bills by a total of £12m less than planned in 2008-09.

Regina Finn, Ofwat chief executive, said that Severn Trent's performance was "unacceptable" and that if the group did not spend the extra money on fixing leaks it would be fined.

Last July, Ofwat decided not to fine Thames Water for missing leakage targets in 2005-06, but instead ordered the group to spend an extra £150m on fixing its leaks.

In both cases, Ofwat stressed that the extra spending would be funded by shareholders, not water customers.

The regulator said that Thames Water, which has missed the targets in previous years, managed to reduce the amount of water it loses from its pipes to 790m litres a day, 20m litres inside the target.

Ofwat said a total of 3.42bn litres of water was lost from pipes in England and Wales each day, down from last year's figure of 3.58bn litres.

Severn Trent, which covers a large area of central England from Yorkshire to Gloucestershire, was badly affected by last month's floods and failed to supply 340,000 of its customers with water after its Mythe treatment works near Tewkesbury was affected. The company said on Wednesday that the floods would cost the group between £25m and £35m but that £10m to £20m would be covered by insurance. The company also said it would give £3.5m to help with community recovery.

Ms Finn said: "We recognise that Severn Trent Water faces other more immediate priorities in dealing with the aftermath of recent floods but it must not lose sight of the work that it needs to carry out to control leakage."