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Well the good news is that it's close to impossible for a water company to cut off a domestic customer so just as you offer to pay something ( £10 per month ? ) towards the debt they'll have to lump it.

Given it's their mistake and your mistake why not offer to pay ( in instalments ) what the estimated METER reading would be rather than the rateable value ( I am of course assuming there is only one or two of you living at the property )?