Water industry regulator Ofwat has ruled that developers' costs in a dispute over their contributions to date towards the provision of one of Anglian Water's strategic assets should be limited to £2.5 million -as a result the developers will receive an as yet unquantified refund, plus associated interest, on their contributions to date.

In October 2009, Ofwat received a complaint from Utility Law Solutions (who represent nine separate developers) about the costs that Anglian Water had charged the developers towards the provision of one of its strategic assets, the Wing Main, which is in the East of England.

The costs that Anglian Water had charged certain developers for the Wing Main were either as part of either a requisition charge where the company had installed the pipework to their developments, or in the form of a self-lay charge where the developer had used their own contractor to do the work.

In its final determination on the dispute, Ofwat has concluded that while it was appropriate for Anglian Water to include a proportion of the costs of the Wing Main in requisition and self-lay charges to developers, the level of contributions collected by the utility from developers was not appropriate.

The determination says that the developers’ contributions should be equal to the incremental costs of the additional capacity of the Wing Main required for new developments, beyond the capacity provided to ensure a security of supply for existing customers.

Ofwat has put this cost at £2.5 million which will be attributed to developers according to their share of the capacity provided. The determination will result in developers receiving a refund, plus associated interest, on their contributions to date.

To reflect the change in the share of costs, Ofwat has also decided to add an extra £2.19 million (adjusted for inflation) to Anglian Water’s regulatory capital value (RCV) – to be recovered from all of Anglian Water’s customers through their regulated prices.

Case flags up wider lessons for companies and customers

Ofwat has also highlighted the wider lessons for companies and customers to be drawn from the case. The regulator considers that its determination  will encourage water companies to make long term investment that identifies and responds to future housing growth in a timely manner and provides a fair decision for developers through more cost reflective charging which better reflects the services they are receiving.

Ofwat wants to see the efficient and timely planning of companies’ networks as this will benefit existing and new customers through shared costs and benefits. The regulator said the determination supports this approach so that companies can build strategic, joined up solutions where multiple development sites are coming forward, rather than progressing a succession of smaller schemes. The determination will also enable the recovery of fair and proportionate contributions from new and existing customers to the infrastructure required to respond to growth.

Commenting on the case, Richard Khaldi, Senior Director, Customers and Casework, said:

“Casework is a key part of our toolkit. This determination supports the vision for the sector as one where all stakeholders have trust and confidence in water and wastewater services. This decision will encourage water companies to make long term investment that identifies and responds to future housing growth in a timely manner, to the benefit of both current and future customers. It also ensures a fair deal for Anglian Water’s developer services customers, since what they pay better reflects the services they are using.”