Ofwat has published the outcome of an independent review it commissioned in 2016 into the connection costs incurred by monopoly water companies when providing new water supply connections.
Owners or occupiers of a property are entitled to ask their monopoly water company to provide a connection to an existing water company water main for a supply of water for domestic purposes. A water company is entitled to charge the customer the reasonable costs of making the new connection. The costs will include connection costs and administration costs. In addition the company is entitled to charge an infrastructure charge for each new connection made to its network for the first time.
The review is intended to provide a new benchmark of new connections costs, following on from 2010, a comparative study Ofwat commissioned from Hyder. Introducing the new independent review, the regulator said it recognised that the Hyder report was no longer reflective of current costs.
The resulting benchmark costs set out in the new review are on average 21% higher than the costs included in the Hyder report. The regulator also uses a separate independent report looking at the administration costs associated with new water supply connections to inform any determinations it makes in disputes.
Source: Ofwat
Connection costs have been compared on the basis of them including the following tasks:
- excavation
- laying of pipe
- materials
- backfill
- and reinstatement.
The review has provided Ofwat with updated benchmark figures for the costs of providing a new water supply connection. However, the regulator has published a summary of the review, rather than the full report on the grounds that the report contains commercially sensitive information about water companies' costs.
When Ofwat consider disputes about new connections made under section 45 Water Industry Act 91, it determines the costs we believe the water company has reasonably incurred in providing the new connection. To date Ofwat has used the Hyder report to provide benchmark costs against which it compares disputed costs in the complaints referred to it about new connection charges.
The regulator will now use the updated review to inform its consideration of the reasonableness of connection costs for disputes referred to it from 27th February 2017 onwards. For disputes referred before that date Ofwat will continue to use the costs in the Hyder report.
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