Doc re Response to Regulatory Review

Response to Regulatory Review

Severn Trent Plc ('Severn Trent' or 'the Group') announced today that Severn
Trent Water will accept Ofwat's final price determination for 2005-2010.

Despite the fact that Severn Trent Water is already performing at or close to
Ofwat's operating and capital efficiency frontiers, the determination includes
extremely challenging efficiency targets. Plans are being put in place to
maintain Severn Trent Water as one of the most efficient companies in the water
sector in terms of both operating costs and capital investment.

Details will be outlined in June at the Group's results announcement, and it is
already anticipated that manpower numbers in Severn Trent Water will fall by up
to 350 in the next two to three years, a reduction of up to 7% from their
current levels.

The objective over the next five years is to ensure that customers in the
Group's regulated and non-regulated businesses get the benefits of high quality
and cost-effective services while ensuring that investors receive an
appropriate return. The Board of Severn Trent Plc intends to maintain, as a
minimum, Group dividends in real terms at least up to 2009/10.

Colin Matthews, who has been Acting Managing Director of Severn Trent Water
since being appointed Group Chief Executive Designate in September 2004, will
take over as Group Chief Executive from Robert Walker, who is retiring, on 1
February 2005.

Severn Trent Plc also announced today the appointment of Tony Wray to the Plc
Board as Managing Director, Severn Trent Water. Tony will join Severn Trent on
7 March 2005. He is currently Director Networks, Eircom, having previously been
Director Asset Management and then National Operations Director, Transco.

Colin Matthews said 'It has been extremely valuable for me to have spent the
last four months getting to know our Water business. I am delighted Tony is
joining us and we will work closely together with our experienced management
team in Water to finalise our plans to meet the challenges posed by the
Regulator. We will outline our detailed response in June when we announce our
annual results.

I am confident that Severn Trent can face the future well equipped to best
serve customers and investors alike and I would like to thank Robert Walker and
his team for the solid foundation he has left for us to build on'.

For further information on the day the following people can be contacted on
0121 722 4310:

Peter Gavan, Director of Corporate Affairs

Julian Wais, Head of Investor Relations

Simon Holberton, Brunswick Group

After 20 January 2005 contact:

Peter Gavan / Jane Rhead 0121 722 4794

Julian Wais 0121 722 4295

Simon Holberton 020 7396 5347

Footnotes:

 1. On 2 December 2004, Ofwat announced its determination for price limits for
    April 2005 to March 2010.
   
Ofwat announced real price increases for Severn Trent of 24.3%, compared to a
requested real increase of 31.1%.

The determination is forecasting an increase in average annual household bills
of £44 from £221 in 2004/05 to £265 in 2009/10, excluding inflation.

In announcing the revised prices, Ofwat made a number of changes to Severn
Trent's plan. These include a reduction in the allowance for capital
maintenance costs, particularly in respect of mains renewal and a reduction in
the costs allowed for alternative sludge disposal methods. Despite the fact
that Severn Trent is at or close to Ofwat's operating and capital efficiency
frontiers, the determination includes more challenging efficiency targets than
in the company plan. The determination includes sufficient costs to fund only
half of Severn Trent Water's pension deficit. In addition, there remain other
areas such as electricity costs, business rates and certain operational areas,
where the determination allows for smaller cost increases than are forecast in
the company plan.

2. Severn Trent Plc will announce its Trading Statement on Monday, 4 April 2005
and its Preliminary Results on Tuesday, 7 June 2005.

3. There will be a presentation on Biffa Waste Services, led by Martin
Bettington, Managing Director of Biffa, on Tuesday, 26 April 2005. The
presentation, together with the presentation slides, will be available as a
simultaneous webcast on the Severn Trent website (www.severntrent.com) and will
remain on the website for subsequent viewing.

4. Tony Wray, aged 43, is currently Director Networks, Eircom, responsible for
the fixed wire telephone infrastructure in the Republic of Ireland, managing
some 4,000 employees and around £1bn of assets.

He joined British Gas as a graduate trainee in 1983 and has held a number of
managerial positions covering transportation, measurement and billing, and
commercial before becoming Head of Asset Management. In 2000 he was Director of
Asset Management, Transco, then National Operations Director, Transco, before
being appointed Integration Director to implement the merger integration of
Lattice (Transco) and National Grid Group in to National Grid Transco.

Born and bred in Leicestershire, Tony is married with two daughters and lives
in Nuneaton, Warwickshire. He has a BSc Hons Geology from the University of
Sheffield.