LONDON (ShareCast) - Water company Severn Trent is raising household bills in the five years to 2020, but pledged to keep increases below inflation amid pressure from government and watchdogs to help cash-strapped consumers.

Severn, which supplies more than 4.2m households and firms across central England and mid-Wales, said it would keep average rises to 1.2% below inflation between 2015 and 2020, resulting in a £12 real-terms reduction by 2020.

It plans to freeze bills in the first year of the period and then to increase them by less than inflation.

The group plans to increase spending on infrastructure and equipment during the period by £600m to £3.2bn against the 2010-2015 regulatory period. Total spending is set to be about £6bn. Its cost of capital will fall to 4.2% from 5.1%.

Severn is raising bills this year and next year by the maximum allowed by industry regulator Ofwat.

The company said: "We believe we've struck the right balance between bills, services and returns to investors."

Severn is raising bills this year and next year by the maximum allowed by industry regulator Ofwat.

Ofwat has said it expects water companies to be able to reduce their bills in the next regulatory period and would demand explanations from those wanting increases.
PW

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