The regulator has provided specific information on the timetable and process for approving the companies’ charges schemes for 2012-13.

The approach Ofwat plans to take to charges approval from 2012-13 will be to approve each company’s charges scheme based on an assurance that it has complied both with its legal obligations and Ofwat’s own principles. The principles set out the regulator’s requirements for the companies’ charges schemes, accompanied by guidelines, which set out how Ofwat think they should meet the principles, together with Ofwat’s view of good practice.

The regulator is currently developing the principles, guidelines and good practice in consultation with stakeholders – including the publication of  a work-in-progress document for comment on the Ofwat website. A version for the 2012-13 charges will be published in  November.

Ofwat’s timetable for approving the companies’ 2012-13 charges is as follows:

• 13 December 2011 – November RPI published.
• 6 January 2012 – Companies submit principal statement and statement of assurance.
• By 31 January – Ofwat approves charges schemes.
• 31 January – Ofwat publishes average household bills once charges schemes are approved.
• By 1 February – Companies provide approved charges schemes to new appointees within one day of approval.
• By 7 February – New appointees submit statement of assurance.
• By 14 February – Ofwat approves new appointees’ charges schemes.
• Companies communicate bill changes after approval.
• March to April – After-action review of the charges approval process.

 Ofwat said that if a company is incapable of providing a statement of assurance and instead submits its charges scheme for full scrutiny, the same timetable for submission would apply. However, the regulator will be unable to approve those charges schemes by the end of January.

Ofwat said its new approach to charges approval means that the companies will need to submit less information.

Expectations for existing charges

Ofwat said it recognised that while it has scrutinised and approved the charges in the companies’ current schemes in previous years, this did not mean that all companies’ existing charges fully complied with its principles. The regulator said that as the companies’ costs and customers’ needs change over time, charges should be periodically reviewed to make sure they continue to meet the companies’ obligations.

Given the time constraints, for 2012-13 Ofwat will approve existing charge structures and differentials even if these do not comply with the principles to be published in November.

However, the companies will be expected to review their charges during 2012, identify where there may be issues, and discuss plans to bring the charges in line with Ofwat principles.

The regulator said it anticipated that this would deal with concerns expressed that the changes are being introduced too late for 2012-13 charges approval.