Ofwat has launched a consultation on proposed changes to Charging Rules for New Connection Services - the changes will complement the deregulation of certain aspects of developer services that the regulator will implement as part of the Price Review 2024 (PR24).

Ofwat is proposing measures that will offer protection to developer services customers for whom market choice is currently limited.

The water sector regulator first consulted on the proposed changes in August 2023 when it set out the options for how Ofwat might protect customers.

Ofwat has now decided on the options and in this consultation is setting out the detail of the changes it proposes to implement.

As part of PR2024, Ofwat is reducing its regulation of the provision of site-specific services, removing these from the price control for water (for English companies) and wastewater (for England and Welsh companies).

Introducing the consultation, Ofwat said:

“We are making these changes to facilitate the development of competition in the developer services market, because these services have become much more subject to competition.”

The proposed changes include the introduction of:

• new price protections for developer customers with limited market choice by capping the difference in charges for sites where competition is lower relative to where it is higher (maximum tether ratio).
• new protections for developer customers with limited market choice by requiring companies to publish separate charges for some activities needed to deliver service connections, within their published Charging Arrangements and worked examples for each scenario.

Ofwat will also implement additional guidance to water companies on allocating overheads between developer services and other activities separately, as part of its work on Annual Performance Reporting. The regulator will allow companies to set infrastructure charges to enable them to recover all the costs of network reinforcements from developer customers.

Ofwat plans to develop its understanding of the effects of deregulation and deepen its knowledge of the developer services market by carrying out a market review early in the next price control period.

Deadline to submit responses to the consultation is 4 July 2024 - click here to download the consultation paper.