Today WaterBriefing is publishing an Executive Briefing on what has been described as the "biggest change in responsibility for sewerage services since 1937" – the forthcoming transfer of responsibility for private sewers and lateral drains to water and sewerage companies.
Prepared by Suzanne Rab, Counsel in the Antitrust, Competition and Economic Regulation Practice at leading London law practice Hogan Lovells, Lateral Thinking on Private Sewer Transfer looks at the prospects that the transfer could provide scope for applications by companies for interim determinations of their current pricing limits and a consequent re-setting of prices before 2014.
Comments from water industry regulator Ofwat on Defra's consultation setting out proposals for implementation of the transfer indicate a likelihood that the water companies are likely to see price increases, with a consequent hike in customer bills, before 2015.
In November 2010, Ofwat expressed its main concern that "the transfer is implemented in a way that minimises costs to the companies and their customers, with investment paced so that the increase in bills that will inevitably follow such a significant increase in company-owned assets occur at an affordable rate".
Many of the companies cited the transfer of responsibility in their Final Business Plans for AMP5 as one of the key reasons which would cause them to ask Ofwat to allow them to seek an increase.
The briefing analyses the proposals in the context of the real prospect of a reopening by way of interim determination of the current price limits. It also provides some suggestions for what companies might do in preparation for the new proposals should they be implemented in their current form.
The adoption of private sewers is undoubtedly an issue of crucial importance to both customers and the water company alike – yet it is still surrounded by considerable uncertainty. Given the paucity of currently available information, the key question will be how Ofwat can allow (or disallow) price increases in relation to the management of assets which the water companies will simply not be in a position to quantify for some time.
Registered readers of WaterBriefing can download the Executive Briefing in full. Registration with WaterBriefing is free. Please click HERE to read Lateral Thinking on Private Sewer Transfer.
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