SPECIALIST papermaker James Cropper plc is facing a big hike in its overheads because a utilities company is refusing to negotiate a new deal.

The Burneside company has enjoyed a rebate on its effluent treatment bill from United Utilities for the past 20 years in return for a contribution towards a new pipeline between Burneside and Kentrigg, Kendal.

But the company, which employs 480 staff, has been told the rebate will end when the agreement runs out in February next year.

James Cropper's sewage bill will then rise by 40 per cent, from £500,000 a year to £700,000.

The paper firm's bosses are resisting the sharp increase in costs, arguing that as one of the utility company's biggest customers in the Kendal area, they are entitled to a discount.

But so far United Utilities has refused to extend the rebate agreement, saying water industry regulator OFWAT will not allow special rebate arrange-ments with a customer.

Now James Cropper has asked Westmorland and Lonsdale MP Tim Collins to intervene by questioning the water regulator about charging rules.

The company says its options are very limited.

One alternative would be to build its own waste water treatment plant at Burneside Mills, rather than sending effluent for treatment at United Utilities' sewage works at Wattsfield, Kendal.

But not only would that be expensive, costing up to £2 million, but under tough new integrated pollution prevention and control regulations, the company would need to meet demanding standards of cleanliness for any treated waste water discharged into the River Kent.

In addition, under the new regulations James Cropper has lost its right to make discharges into the river in the event of an emergency, if for example the sewer to Kendal collapsed.

While the company has never needed to make discharges into the river in the past, chairman James Cropper said the firm would face a very difficult dilemma if it ever needed to make a choice between shutting down papermaking operations or making illegal discharges into the river.

The paper firm uses around one-and-a-half million gallons of water a day from the River Kent, which is designated as a site of special scientific interest.

Mr Cropper told Business Gazette that the MP had agreed to contact the water regulator OFWAT to see if there was any room for manoeuvre over future charges.

Mr Collins said as one of the most significant employers in his constituency, it was important to make life easier rather than harder for James Cropper.

He pledged to not only contact OFWAT, but also raise the issue with the DTI and the North West Development Agency.

" As an area over the years, we have lost out when locally-based companies are taken over by firms from outside the area.

When we have a company not only as big as James Cropper which could not be more local in terms of its roots, we need to give it a helping hand," he said.

A United Utilities spokeswoman confirmed the company was working closely with James Cropper plc to look at alternatives but she added there were no easy or cheap options.

"We cannot discriminate in this case because this would be in breach of our licence conditions and the water regulator OFWAT would not allow it.

" The charges are agreed with OFWAT so our £3 billion, five-year environmental investment programme can be carried out."