Customers of Severn Trent Water are to receive refunds after an investigation by regulatory body Ofwat found that the firm had overcharged each household by £2-£3 a year.

Ofwat discovered that customers were overcharged £2m in total during 2004-05 and that prices up to 2010 had been set too high. Around 3.5 million customers in the Midlands will now get an apology and an average refund of £4 in their next bill.

“Customers have the right expect companies to maintain the highest standards of corporate governance,” said Ofwat director general of water services Philip Fletcher.

“Severn Trent’s approach fell significantly below these standards.”