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Mr C Mellor
Managing Director
Anglian Water Services Ltd
Anglian House
Ambury Road
Huntington
Cambridgeshire
PE29 3NZ

19 December 2000

INTERIM DETERMINATION

On 28 September you made an application for an interim determination of your company's price limits under Part IV of Condition B of the licence. You cited two changes, greater numbers of customers taking up the free meter option and the cryptosporidium monitoring requirements placed upon your company by the Drinking Water Inspectorate (DWI). Your estimates of the effect of these changes on your costs and revenues were set out in a report attached to your application and are summarised inAnnex A.The Reporter, Jeremy Long of Binnie Black & Veatch submitted his report on your application on 13 October.

On 15 November I issued my provisional response to your application. You subsequently sent me your representations and we discussed these matters on 5 December.

We have completed our assessment of your application and subsequent representations in the light of all the information available to us. Our approach and our findings, judgements and conclusions are set out in Annex B attached to this letter. We have provided you with some explanatory notes expanding on Annex B. Our final assessment of the impact of the changes of your costs and revenues are set out in the summary table (Annex A).

Following your representations we have reviewed our position and made the following changes to the draft determination:

• We have changed our assumption about future trends in numbers of customers opting for a meter. We have assumed that 17.5% of your 1999-2000 unmeasured water customer base will switch to a meter between April 2000 and March 2005.
• We have changed our assumption about the mix of internal and external meters to be consistent with the Competition Commission.
• We have changed our assumptions about optant pre-switching consumption (water delivered) patterns.
• In our provisional response we took account of planned quality enhancement work that had been funded in price limits but was no longer required having issued a counter-notice to this effect on 15 October. In the light of your representations we have decided not to include this in this determination. The appropriate adjustments to reflect these changes in quality enhancement work will be dealt with at the 2004 Periodic Review.
• We have made a small change to the efficiency assumption for continuous monitoring and testing for cryptosporidium.

We have concluded that the impact of the additional meter optants on your costs and revenues is not sufficient to exceed the materiality threshold set down in Condition B of your licence. In these circumstances we find no basis for changing price limits set in November 1999. Even if we were to allow the additional costs for continuous monitoring for cryptosporidium, which we consider to be trivial, the two items together would not exceed the materiality threshold.

We are placing this determination in the Ofwat library at the same time as announcing our decision to the London Stock Exchange.

This letter and enclosures has been copied to Alan Davis (DETR), Michael Rouse (DWI), Robert Runcie (Environment Agency), Roger Corbett (Chairman of Eastern CSC), Jim Gardner (Chairman of Northumbria CSC) and to all your local Members of Parliament and Members of the European Parliament.

PHILIP FLETCHER

Click here for the draft interim determination issued on 15 November 2000