Southern Water has given no guarantees it would compensate victims of a devastating flood but said it would consider everyone on a "case-by-case" basis.
It comes amid rising anger among residents and businesses in Hastings over the failure of the company's multimillion pound flood protection scheme.
The town's MP, Michael Foster, said it was "incredulous and amazing" that the scheme failed and he has written to Southern Water to demand an inquiry into why it happened.
Up to 40 firms and about a dozen homes, plus Hastings Town Hall, were affected as water swirled through the town centre on Monday morning following an overnight downpour.
It was initially thought the failure of a £43 million storm tunnel built by Southern Water in 2000 to stop flooding was to blame for the devastation.
But, following preliminary investigations, the company yesterday said it believed a mechanical failure at its Coombes pumping station was instead at fault. Pumps are understood to have failed to operate at the station, which is a huge underground labyrinth of pumps, pipes and other machinery housed on three levels in a 115ft-deep shaft.
Demands grew last night for Southern Water to compensate residents and businesses for the damage.
And the company indicated it would be prepared to pay out, saying it would visit affected customers in the near future and decide whether to compensate on a case by case basis.
Pratibha Paleja, 49, fears she will now be uninsurable following the fourth flood in as many years at Smokemart Cutprice newsagent in Station Road.
She said: "I don't want to claim on my own insurance because my premiums will shoot up. I want Southern Water to pay.
"After all, it is because of them that all of this happened. Why should I have to pay to replace everything when the cause of the problem was out of my control?
"I have lost a lot of money through this, running to several thousands of pounds. This is a very busy town centre newsagent yet we're not able to operate fully because of this."
She criticised Southern Water's response to the flood, saying no one from the company has yet visited her.
Makeshift efforts have been made to get the business back to some normality, however. Heaters had been set up inside the shop to dry sodden floors and walls while thousands of pounds worth of stock and equipment had to be written off.
Pictures taken by Mrs Palega's teenage son captured the full scale of the flood as it surged down Station Road towards Priory Meadow shopping centre at about 5.45am.
Mrs Palega's call for Southern Water to pay up was shared by Eamon O'Connor, landlord at the nearby Clarence pub in Station Road.
His cellar and all the contents, including a beer chiller worth £10,000 alone, were destroyed by sewageinfected floodwater.
Mr O'Connor, 39, said: "The fact is that Southern Water's equipment was at fault and therefore they will have to rectify the situation.
"That means compensating those affected. If you were involved in a car crash and you were driving too fast you would be expected to pay up.
"The same goes here. Southern Water has got to atone for its actions."
Yesterday, Mr O'Connor was waiting for assessors to survey the damage but he expects to be closed for at least a fortnight.
In the meantime, he led The Argus on a tour of the pub, showing how water filled his cellar - contaminating thousands of pounds of stock and equipment despite lengthy efforts by fire crews to pump out the floodwater.
He said it was a miracle the water did not spark an electrical fire as the cellar houses fuse boxes, lighting and other equipment.
He said: "It's going to be a big job. Where do you start?"
Other shops affected included 1066 bakery, Whittards, Virgin, Subway, Thorntons, The Officers Club, Robert Dyas and F. Hinds.
More than £20,000 damage was caused at Milletts in the town centre as water poured into the basement where stock and computer equipment is stored.
However, the firm managed to carry on trading in a limited capacity by accepting credit card transactions only. Assistant manager Angela Kendrick said: "Everything was under water downstairs. When I came in at 7.45am about 4ft of water had built up. There's a lot of damage."
In nearby South Terrace, mother of one Sarah Lake broke down in tears as she described the trauma of having no water, no electricity or any warmth in the two-bedroom basement flat she shares with her partner William Mayers and their one-year-old baby.
They have been forced to live in bed and breakfast accommodation as floodwater seeped through the whole of their flat opposite Priory Meadow, contaminating everything.
Ms Lake said: "I can't go back to work until all of this is sorted. We have to go out for lunch, dinner and breakfast and it is just a nightmare.
"We have just come back from the housing office but they said there is nothing they can do for us. The council has offered to take us out of the B&B we are in at the moment and transfer us to another one but we will have to pay for that because we both work."
Fortunately, she bought house insurance last month. But in the meantime, they face the uncertainty of not knowing when they will be able to move back home.
Hastings and Rye Labour MP Michael Foster said it was "incredulous and amazing" that such a flood should occur after so much investment in flood protection by Southern Water in Hastings.
He said homeowners paid the company's high water rates to ensure that facilities such as its pumping station are maintained properly.
Mr Foster said: "I have asked Southern Water in my letter to them for an explanation as to why this was allowed to happen and assurances it won't happen again. We were told when the storm tunnel was built that it had a capacity way beyond the amount of rainfall we had on Monday.
"So it comes as no surprise that we now learn that it was not the storm tunnel at fault but the pumps at Coombes pumping station.
"Clearly this has caused a lot of inconvenience and trouble for residents and traders. It is also bad for business for a town like Hastings to have sewage in its streets.
"This does appear to have been a major problem and we are looking to Southern Water to better maintain its facilities so this won't happen again."
In a statement, Southern Water said: "Initial investigations carried out following the flooding in Hastings town centre yesterday show that there was no problem with the operation of the stormwater tunnel.
"Instead we believe there was a mechanical failure at the Coombes Pumping Station, which resulted in the pumps failing to operate.
"Engineers are currently on-site carrying out further investigative work into how and why this happened.
"In the meantime, our operators will be controlling the pumping station manually, 24 hours a day, until we can put in place an effective, long-term solution.
"Teams are continuing to work in the town helping with the clean-up operation.
"We will be contacting all customers affected in the near future and we will look at all our customers' circumstances on a case-by-case basis."
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