Response - OFWAT announcement

Northumbrian Water Group PLC
05 November 2003

5 November 2003

                  OFWAT INDICATES CHARGES INCREASE FOR 2004/05
                                        
Water bills for Northumbrian Water Limited's customers in the north and south of
England could rise by 9.6% in real terms from April 2004, according to an
announcement today by water regulator Ofwat.

The average bill quoted by Ofwat in its initial announcement today of £325 was
incorrect and Ofwat are to issue a correction.

Northumbrian Water calculates that with an increase of 9.6% average water and
sewerage bills in the north which are currently £206 are expected to rise to
around £225 in April next year.

Average water-only bills in the Essex & Suffolk region, currently averaging
£113, are expected to rise to around £124 in April next year.

Even after the proposed increases Northumbrian Water customers in the north will
still be paying about £16 less in April 2004 than they did in 2000 because of
previous price reductions. In Northumbrian Water's Essex & Suffolk region
customers will be paying about £5 less than they did in 2000.

Director General of Water Services, Philip Fletcher, announced his draft
determination on Northumbrian's application for an interim determination of K
(IDoK). The matter has been put out to public consultation and the regulator
will announce his final decision in mid-December 2003.

The application to increase water charges in real terms in 2004/05 was made
because the company, which trades as Northumbrian Water in the north and as
Essex & Suffolk Water in the south, faces unanticipated additional costs caused
by increased customer debt and the costs of collection, water quality monitoring
and new obligations requiring capital expenditure.

In addition to the standard interim determination application, the company also
made an application under the 'substantial effects' clause because of lower than
expected level of revenues from both household and non-household customers.

The draft determination would allow a 6.8% increase for the standard IDoK
application and an additional 2.8% for the 'substantial effects' clause.

Northumbrian Water Limited's managing director, John Cuthbert, said: "This is
the latest stage in the process to set charges for next year. We now have to
analyse the information that lies behind today's announcement to assess the
implications for customers and the company. We will be meeting with Ofwat in the
next few weeks and will also make a formal written response.

"I can confirm that any increase allowed from April 2004 will reduce the charges
increase we have applied for in the next Periodic Review covering the five year
period from 2005 - 2010."



Notes for editors:

Water companies' charges are set by Ofwat every five years for the following
five year period in a process called a Periodic Review. The regulator sets the
percentage (known as 'K') above inflation that companies can raise, or must
lower, their charges in the following five year period (the K figure can be
negative as well as positive). If companies face changes to their obligations
that were not taken into account in their previous Periodic Review, they can
apply for an interim determination of K (IDoK) to reflect their changed
position.

Northumbrian Water Limited submitted its draft business plan for the next
Periodic Review (for the period from 2005 - 2010) to Ofwat in August 2003. In it
the company seeks permission to increase charges by 37% in real terms by 2010.
This would take average household water and sewerage bills in its northern
region from £206 in 2003 to £286 plus inflation in 2010 and average household
water bills in its southern region from £113 in 2003 to £153 plus inflation by
2010. However, the increases will be modified in the light of the final outcome
of the IDoK applications.

Enquiries 

Finsbury                        020 7251 3801
Rollo Head
Anthony Silverman


Northumbrian Water Group plc    0191 301 6851
Alistair Baker 

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