Ofwat has launched a new consultation on proposed changes to its Charging Rules tor New Connection Services (English Undertakers) which first came into effect in April 2018.
The water industry regulator said that since publishing the rules, it had received feedback that the differences between companies’ arrangements can be confusing and that the differences in levels of charges are so marked that they are unlikely to be a function of cost alone.
Ofwat is concerned that such problems may undermine key principles of the rules, including that the charges are predictable, transparent and fair. The rules were introduced to address issues around transparency, cost reflectivity, inconsistencies with charging between water companies and potential cross-subsidies.
As part of its work to better understand the issues, Ofwat has undertaken a comparative analysis of the 15 English incumbent water companies’ charging arrangements for 2019/20.
According to the regulator, a disadvantage of the new connection rules in their current format is the consequential inconsistencies across companies’ charging arrangements. The consultation paper says the inconsistencies often create an unnecessary administrative burden for developers who may work in more than one water company’s area and that it is “a particular problem for self-lay providers (SLPs) and new appointees (NAVs) who almost certainly will do so.”
In addition, the existing new connection rules may not provide sufficient guidance to ensure water companies’ charging arrangements can be easily understood and interpreted by their users.
Ofwat is also particularly concerned about the wide divergence in charging levels, which it considers to be “so marked that it could not be explained simply by differences in companies’ costs.”
The regulator is now seeking views on its findings and its proposals on how Ofwat and industry should address the issues raised.
Ther consultation paper says it is not yet clear how, and for how long, the impact of Covid-19 will affect companies’ priorities. As an initial step Ofwat’s proposal for companies’ charging arrangements for next year (from April 2021) is therefore for companies to use worked examples more consistently.
The regulator then expects to introduce more significant changes to harmonise charging arrangements from April 2022, which is also when new connection charging rules for Welsh companies are due to be introduced.
Deadline to submit responses to the consultation is !6th September 2020 – click here to access the consultation document.
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