Under the Water Industry Act 1991 Ofwat is required to approve each appointed water company’s water and sewerage charges every year before they can bill theircustomers.
Introducing the consultation Ofwat said:
"The way we have approved customer charges is detailed. Given the growth in their complexity, it is also increasingly burdensome. We recognise the concern that this may lead the companies to focus their effort on Ofwat’s process for approval rather than their customers’ needs. There is also a concern that the process inhibits innovation in tariffs."
Ofwat is proposing to address these issues by simplifying the process, reducing the burden and targeting its effort carefully on the areas of most importance to customers for the period 2012-14.
The regulator said learning lessons from the revised process would help to decide how best to regulate charges after 2015 when it next set price limits.
Under the proposals, Ofwat would end the process of individual checks of each company’s individual charges before it approves them and instead seek assurance from each company that it has complied with its obligations and with Ofwat's principles and guidelines on charges which it will set out. Ofwat now proposes to approve the companies’ charges schemes if it receives company assurance, and if the Consumer Council for Water is content.
IThe regulator wants CCW to have had "meaningful involvement" during the development of any new charges. Ofwat will target checks on the companies’ charges following approval by focusing on charging issues with significant risks and impacts for customers.
Ofwat said this would make better use of resources and reduce the regulatory burden, as well as maintaining protection for customers. The proposal would also result in faster approval for the companies, as well as a reduced data burden and more transparency about the principles on which the charges have been based.
Deadline to submit comments on Ofwat's proposed approach to the consultation is 7 October 2011.
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