Ofwat has published a new discussion paper setting out its thoughts on new connections charging – which includes “allowing regional variation where the circumstances warrant it.”
The Water Act 2014 made changes to the Water Industry Act 1991 allowing Ofwat to set rules about charges for new connections – this is where an owner or occupier of a premises/building, to which the supply of water and/or wastewater services are provided, requires access to the existing public water supply or wastewater system by means of a service pipe or lateral drain, or a new water main or public sewer.
The proposed rules will cover new connections to both household and non-household premises, but only where the connections are for ordinary domestic purposes (normally drinking, washing, cooking, central heating and sanitary purposes). The rules will not cover applications for a supply of water for non-domestic purposes (forexample, for factory production purposes) or to discharge trade effluent to a public sewer.
Earlier this month a new report from the Housing & Finance Institute criticised the water companies for sluggish connections to water and sewerage infrastructure which were slowing up the rate of UK housebuilding.
The Ofwat discussion paper says effective charges to developers will not only reduce administrative burden and delays - which will help support house building - but could also send beneficial price signals, which could lead to lower costs incurred overall and benefits to the environment. Improved transparency of charges would also help ensure a level playing field between incumbent water companies and other parties that may wish to provide the necessary infrastructure.
Ofwat will formally consult on charging rules for new connections in the summer, which will cover companies operating wholly or mainly in England. Before then, the discussion document sets out a series of options for different charging approaches, and Ofwat’s emerging thinking on how it could help facilitate improvements in water companies’ approaches to charging via the rules.
Introducing the discussion document, Ofwat said:
“Our emerging thinking is for rules that allow sufficient flexibility and tailoring of charges to meet customer needs. This includes allowing regional variation where the circumstances warrant it.”
Ofwat also wants to increase predictability through requiring water companies to set out a number of fixed charges - or clear methodologies for calculating their charges - upfront. The regulator also plans to set a requirement for companies, in developing their approaches, to consider the role of charging structures that send “environmentally beneficial price signals” to developers, as well as promoting overall system resilience.
Deadline to submit feedback to the emerging thinking discussion paper is 21st April – Ofwat will then consult formally on the charging rules for new connections in the summer.
Click here to download New connections charging – emerging thinking for discussion