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Severn Trent to give £3.5 million of flood aid Guide

August 8, 2007 at 5:22 pm

Monday 6th August saw the reopening of the Mythe Water Treatment plant in Tewkesbury, Gloucestershire. It had shut 17 days previously, after the plant’s flood defences were overwhelmed by the rising waters of the River Severn. Local operator Severn Trent carried out a controlled closure of the site, leaving 140,000 households (around 340,000 people) in the surrounding areas without clean tap water. Residents were forced to boil their tap water before using it, or find bottled water.

In a statement designed to pacify irritated customers, Managing Director Tony Wray said “We at Severn Trent recognise that many communities in Gloucestershire and Worcestershire have suffered significantly during this period. Therefore we have decided to make available up to £3.5 million to support those communities in recovering from this incident. Severn Trent will be working with the local authorities to determine how to make best use of this money. We believe that a contribution such as this will be of long term benefit to all in the community.”

The company hopes this money will help its customers who are out of pocket but unable to claim compensation. Under normal circumstances, Severn Trent would be obliged to give financial reimbursement to its customers when it was unable to supply them with water. The Guaranteed Standard Scheme allows each account-holder £20 for each 24 hour period they are without water. Business customers are entitled to £50. However, because of the severity of the weather and unprecedented scale of the ensuing floods, the scheme does not apply and Severn Trent is not obliged to compensate its customers. This has angered many out-of-pocket Gloucestershire residents, who consider £3.5 million a pinch of salt compared to the £326 million pre-tax profit made by the company last year.

The company also warned its shareholders that the costs of the flooding would be in the region of £25 to £30 million, with insurance recoveries likely to be between £10 and £20 million. The company made it clear that this is an initial estimate and may be subject to revision as the extent of the damage continues to be made clear. The company also defended its response to the emergency, which has been criticized by some MPs and consumer groups. The company’s actions included:

  • Purchasing 50 million litres of bottled water
  • Deploying 1,300 water bowsers and refilling these 3 times a day with a fleet of 100 tankers
  • Deploying 2000 emergency staff to the area to manage the crisis and restore water supplies as quickly as possible
  • Installing additional flood protection equipment soon after regaining access to the station at Mythe.

The company is currently in talks with regulator Ofwat and the government to determine who is going to foot the bill for the flood damage. Some would argue that as businesses, water companies expose themselves to flood risk when entering the market, and it should not be up to the government (ie. the taxpayer) to bail them out – especially when their business has proved so profitable in recent years. However, should the government not provide money, the structure of the UK water industry means that companies such as Severn Trent enjoy regional monopolies, and would be able to pass on their costs to their customers fairly easily.

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