The Department for Environment Food and Rural Affairs (Defra) has launched a new consultation on its draft guidance to Ofwat for water and sewerage connections charges.

Defra said the guidance is part of a framework of tools to encourage growth by enabling developers to better plan for connections to water and sewerage systems by identifying, quantifying and planning for the costs associated with doing so.

The term  “developers” is used throughout the consultation paper as these are the customer group most often impacted by the changes. However the connection charges may also apply to self builds, self-lay organisations and existing customers who wish to have their water/waste water pipework renewed.

Introducing the consultation, Defra said that Ofwat must have regard to four overarching government principles for charging in respect of water and sewerage services in determining the Charging Rules:

• Stable and predictable charges
• Transparent and customer focused charging
• Fairness and affordability (including to existing and new consumer customers)
• Environmental protection

According to the consultation paper, the government's is that developers should bear the on-site costs that reflect the cost of their connections to, or adoption of, water and sewerage systems.

The costs should be fair and proportionate and water companies should provide services to developers at the earliest reasonable opportunity. The government also takes the view that developers should also bear the costs needed to provide and augment the existing network infrastructure (on or off the development site) such that the network can meet the need associated with their connections to, or adoption of, water and sewerage systems.

Charges that are simple and can be clearly related back to costs will build confidence within the developer community

However, the government believes that developers should not be required to bear the costs of reinforcing, upgrading or otherwise changing existing network infrastructure to address pre-existing shortfalls in capacity or capability. The consultation document states:

“Charges that are simple and can be clearly related back to the costs incurred by the water sector for connections etc. will build confidence within the developer community. Charges which are finalised at the earliest opportunity will allow developers to plan and budget for new developments more effectively. This is the case even if it is acknowledged that it may be more difficult providing detailed predictions when it is unclear whether and to what extent network reinforcement is required as a consequence of the new development.”

Key questions Defra is seeking stakeholder comment on are as follows:

• Do you agree that the current balance of contributions between developers and existing billpayers should be maintained?
• What are your views on the guidance provided under the principle of stable and predictable charges?
• What are your views on the guidance provided under the principle of transparent and customer focused charging?
• What are your views on the guidance provided under the principle of fairness?
• What are your views on the guidance provided under the principle of environmental protection and sustainable growth?

Ofwat charging rules should promote effective competition in both water and sewerage sectors

The paper also says that Ofwat should set charging rules that promote effective competition in both the water and sewerage sectors, commenting:

“We want to ensure a sustainable and resilient water sector. Ofwat should set charging rules that allow for relevant costs to be adequately reflected in charges in order to provide incentives for efficient resource use and installation of innovative solutions that are sustainable over the longer term, including rainwater harvesting, grey-water reuse and sustainable drainage systems (SuDS). Charging rules that encourage collaboration between neighbouring landowners, developers in the same greater or neighbouring sites and undertakers are desirable.”…

“When preparing, reviewing and/or revising charging rules, Ofwat will need to give consideration to enabling flexibility for future innovation in sustainable technologies and solutions.”

Government is committed to doubling number of self and custom builders by 2020

Defra said the Government is committed to doubling the number of self and custom builders by 2020 and that Ofwat should therefore examine how its charging rules can help to achieve this. The paper states:

“We would expect Ofwat to consider how to make it quicker, easier and cheaper for self and custom builders to connect to the water and sewerage networks.”

“Ofwat should set charging rules which encourage water companies to meet their developer service standards and recognise the impact of unnecessary delay on housing supply.”

Defra said the proposed changes would encourage growth by enabling developers to better plan for connections to water and sewerage systems by identifying, quantifying and planning for the costs associated with doing so, commenting:

“The government also expects the water sector to play its part through pace, innovation, responsiveness and streamlined processes to help achieve our ambition for one million new homes delivered by 2020.”

Deadline to submit responses to the  consultation is 22 July 2016 – Defra will then consider and act upon any feedback, with a view to publishing the final Charging Guidance later this summer. Defra said this will provide Ofwat with sufficient time to develop and consult on their Charging Rules, with a view to implementing the new regime for connections charges in April 2017.

Click here to download the consultation paper :Water industry: draft guidance to Ofwat for water and sewerage connections charges