SSW Sth. Staff.

RNS Number:6708B
South Staffordshire Plc
05 August 2004


                            South Staffordshire Plc

                              Draft Determination

South Staffordshire Water, the principal subsidiary of South Staffordshire Plc,
has today received the Draft Determination from the water regulator, Ofwat
setting out their preliminary decisions on the level of water bills and
investment for the 5 year period from 2005 to 2010.

The Draft Determination is the latest stage in the review of prices for the 5
year period and follows the submission of the Company's Final Business Plan to
Ofwat in April 2004. The Company has six weeks to clarify the areas where a
different professional judgement has been exercised by Ofwat before formally
responding to the Regulator. Ofwat will announce the Final Determination on 2
December 2004 for implementation in April 2005.

The Company had proposed in its Final Business Plan a 9.7% increase on its
current low charges from April 2005, with an average increase of 2.4% per annum
in the following four years, resulting in an average increase over the five
years of 3.8% per annum.

Ofwat's Draft Determination for South Staffordshire Water is an increase in
bills of 7.4% from April 2005, and an average increase over the five years of
2.5% per annum as follows:

2005/6           2006/7        2007/8          2008/9          2009/10
7.4%             2.4%          1.2%            0.6%            0.9%

These increases would result in average annual household bills increasing by
#11.

As part of the Plan the Company had proposed higher levels of asset renewal,
including a 40% increase in the rate of mains renewal, with a 5 year capital
investment programme of #104m (net of contributions), broadly in line with the
past five years. Ofwat's Draft Determination recognises the need to increase
mains renewal and allows for capital expenditure in total of #88m.

South Staffordshire Water is one of the most efficient businesses in the
industry and significant further savings will be difficult to achieve. This has
been recognised by Ofwat and the Draft Determination assumes efficiency savings
of 0.3% per annum are achieved.

The Company also has some of the highest levels of service in the industry. It
is pleasing that this has been recognised by Ofwat with 0.4% added to price
limits.

The allowed return assumed in the Plan was 5.9%, including a small company
premium of 0.7%, based on the actual cost of the Company's debt and its assumed
level of gearing across the period. Ofwat have assumed an allowed return of 5.1%
for the industry, plus a small company premium of 0.4% for the Company, 5.5% in
total - in line with that allowed for the Company at the last review.

Commenting on Ofwat's draft determination Adrian Page, Group Finance Director,
said "We are reviewing the detail of the Draft Determination. There are some
areas where Ofwat's judgement differs from our own and we look forward to
clarifying these with Ofwat during the consultation period. South Staffordshire
remains committed to achieving an outcome which strikes the right balance
between the interest of customers and shareholders".

Enquiries:
Adrian Page, Group Finance Director (01922 618001)

5 August 2004

Notes to editors
               
     1.   South Staffordshire Plc was demerged from Homeserve Plc (formerly 
          South Staffordshire Group Plc) on 6 April 2004.

     2.   South Staffordshire Water supplies clean drinking water but not 
          sewerage services (which are separately provided to its customers by 
          Severn Trent Water Ltd). South Staffordshire Water supplies water to a 
          population of 1.2 million and to commercial customers in the Midlands. 
          Of the 22 water companies in England and Wales, South Staffordshire 
          Water has the third lowest average annual household bill of #92 per 
          annum (21% below the industry average), the second highest levels of 
          service for the year to 31 March 2003, as measured by Ofwat in its 
          overall performance assessment, and its operating cost base is one of 
          the most efficient ranked second in the industry by Ofwat.

     3.   Further information on the Draft Determination is available on Ofwat's
          website - www.ofwat.gov.uk.


                      This information is provided by RNS
            The company news service from the London Stock Exchange

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