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United Utilities (UU) faces a £15 million hit due to rising customer compensation costs as its battle against the cryptosporidium parasite moves into the third week.
The water company has been forced to assure its Lancashire customers and the local media that although it is facing “a colossal compensation bill” it would not offset this cost by pushing water bills higher.
The £15 million estimate is based on a previous case in Bolton where consumers had to boil their drinking water for five days and UU was forced to pay out £15 per house to cover the cost.
“So with the issue now in the third week, taking 300,000 households and businesses, each paid £15/per week, the cost is around £13.5 million,” said utilities analysts at RBC Capital.
The boil notice remains in place meaning the compensation payouts are set to rise.
“At £15 million, that’s around 0.2 per cent to the market cap,” the analysts added.
A spokesman for UU told the Lancashire Evening Post: “We will be compensating all homes and businesses who have been affected by the boil water advice notice.
“We are continuing to focus on returning water supplies to normal as quickly as possible. We will then be contacting customers who have been affected to explain what we intend to do by way of compensation, as soon as possible.
“We will look at businesses who have been significantly affected on a case-by-case basis,” the spokesman added.
The company has already seen its shares shed over 5 per cent in value following the parasite contamination, plunging from 904.50 pence a week ago to 856 pence on Monday morning.
For more on the impact of the parasite on UU see Utility Week’s analysis here.
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