Severn Trent seeks permission for price rises

Severn Trent, the country's second biggest water supplier, yesterday disclosed that it has asked the regulator Ofwat for permission to raise its prices.

The company, the largest quoted supplier left in the water sector, said it had applied to Ofwat for an interim determination to allow it to pass on increases in certain costs to customers.

There is speculation that Kelda, the owner of Yorkshire Water, may follow suit along with Thames and United Utilities, which owns North West Water.

Severn Trent's costs have risen partly because of an increase in bad debts now that it is no longer allowed by law to disconnect customers who fail to pay their bills.

The company said it had also been saddled with additional costs relating to cleaner water regulations and extra sewage schemes.

A spokesman refused to put a figure on the total increase in costs Severn Trent now faces but said that together they justified the application for an interim determination. Any increase in bills that the regulator allows will not be passed through until next April.

In a trading statement issued ahead of its closed period, Severn Trent also said it was still on target to achieve savings of £75m a year by the end of the current price control period in April 2005. Dividend policy – to pay out a minimum of 45p until that date – also remained unchanged. Capital expenditure this year is expected to reach £430m. In a falling market Severn Trent shares rose 2.5p to 596p.

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