Severn Trent's Strategic Business plan proposes:

• An initial one-off price cut of 5% in 2000 - £11 off customers' bills.

• Prices will then increase by 1 1/2% pa above inflation for the four years 2001-2005 to finance an investment programme of £2.3bn.

• Efficiency savings of 3% pa of controllable operating costs and 7 1/2% off capital investment costs.

• An average regulated return after tax of 5.7% pa.

Severn Trent Water, the wholly owned subsidiary of Severn Trent Plc which supplies water and sewerage services to over 8 million people in the Midlands and parts of Wales, today announced proposals for reductions in customer bills from 1 April 2000, together with capital investment plans totalling £2.3 billion over the five years to 2005.

On Friday 9 April, Severn Trent submitted to OFWAT its plan for delivering further improvements in services to customers and the environment. Severn Trent proposes to reduce bills by an average of 5.0%; this will mean a reduction of £11 in the average household bill. In the following four years there will be a small increase in bills at the rate of 1 1/2% pa above inflation.

Commenting on the plan, Vic Cocker, Group Chief Executive, said

"We believe everyone can benefit from this balancing of new investment spending and price cuts. Customer bills will reduce by £11 next year but we've been able to plan for improvements in our services and the environment. We will be investing a further £2.3 billion in our treatment plants, infrastructure and distrubution system - bringing the total since privatisation to over £7 billion."

In broad outline these improvements will require work at 65 different water treatment works, the rehabilitation of 1,900km of water main, the replacement of over 150,000 lead communication pipes, improvements at nearly 400 sewage treatment works and the removal of nearly 370 combined sewer overflows.

"This is the most extensive programme of investment the company has ever undertaken," said Mr Cocker.

"Our plan is a stretching one - we have targeted 3% pa efficiency improvements in our controllable costs and 7.5% reduction in capital investment costs based on current prices."

"The planned regulatory return on our assets averages 5.7% over the five years, which represents a fair return for our shareholders and a very good deal for our customers, who will continue to benefit from the second lowest average bill for unmeasured water and sewerage charges."

"We will be duscussing our plan with Ian Byatt, the Director General, Office of Water Services, and we expect the final price determination to be announced by him in November."