Lower water consumption levels among customers with meters will wipe up to £14 million from revenues at Severn Trent (SVT) in the current financial year.
However, the Coventry-based utility company said in an update to the London Stock Exchange that the fall in demand had not affected its overall performance and that current trading was in line with expectations.
ST added it was closely monitoring customer debt and cash collection, which it sees as a risk given the current economic climate. It said there had been no material deterioration in the year to date.
The company said that prices in its regulated water business increased by 5.07 per cent from April 1, including inflation.
It added: “We have previously noted a decline in consumption across our measured income base. We expect this to continue and estimate it will impact revenues by around £12 to £14 million in the current financial year.”
The company also said it expects to spend between £130 million and £140 million on infrastructure renewals during the financial year, which started in April.
Severn Trent serves a population of more than eight million people from the Bristol Channel to the Humber, and from mid-Wales to the East Midlands.
Earlier this month, regulator Ofwat confirmed a fine of £35.8 million for Severn Trent Water’s actions in deliberately providing false information and poor customer service in 2005 and earlier years.
A day earlier Severn Trent was fined £2 million at the Old Bailey in London after pleading guilty to two offences under the Water Industry Act of making false returns to Ofwat concerning 2001 and 2002.
Chairman Sir John Egan said in a separate statement at Severn Trent’s annual meeting in Birmingham yesterday that the company accepted the fine.
“When Judge Jeremy Roberts passed sentence at the Central Criminal Court on 1st July, he said that the company’s leakage reporting in 2001 and 2002 was a serious case involving a lack of commercial probity and integrity - and that people at a senior level were involved over an extended period in deliberately concealing the true position,” Sir John said.
“However, the judge then stated that the new regime had learnt its lesson and put its house in order, and the individuals responsible are no longer in post.
“Severn Trent has decided to accept the £2 million penalty and will not appeal. “There is no doubt that the previous regime and culture in place during 2000 to 2004 lacked appropriate controls and procedures. There were indefensible shortcomings during that era.
“However, having considered very carefully all the options and possible outcomes and having taken legal advice, we have decided not to pursue the former management because there would be no guarantee of success or recompense and therefore such action would not be in the best interests of our customers and other stakeholders.
“Almost four years of intensive time and energy has been invested by this board and management team putting our organisation back into the positive position our customers, regulators, shareholders and employees deserve.
That time and energy is now better spent delivering our programme of service improvements for customers and satisfying the expectations of regulators and shareholders.”
Chief executive Tony Wray told the AGM: “We have already made good progress on our improvement programme - achieving better customer service standards and outperforming against a tougher leakage target - but still have further to go.”
Severn Trent will publish a further trading update on September 23 ahead of its interim results statement on November 25.