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Dr M Brooker
Managing Director
Dwr Cymru Welsh Water
Heol Pentwyn
Nelson
Treharris
CF46 6LY

19 December 2000

INTERIM DETERMINATION

On 29 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 five changes, greater numbers of customers taking up the free meter option; the cryptosporidium monitoring requirements placed upon your company by the Drinking Water Inspectorate (DWI); requirements for plumbosolvency treatment as well as new undertakings you have given to the DWI and finally a further series of improvements to effluent discharges imposed by the Environment Agency (EA). 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 in Annex A. The Reporter, Jeremy Hawkins of Halcrows submitted his report on your application on 10 October.

On 15 November I issued our provisional response to your application. You subsequently sent me your representation and we discussed these matters on 4 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 summarised 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 and confirmation of quality and environmental programmes from DWI and National Assembly for Wales we have reviewed our position and made the following changes to the provisional determination issued on 15 November:

• 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 patterns;
• we have made a small change to the number of sewerage only optants, following further information from you.
• we have made a small change to the efficiency assumption for continuous monitoring and testing for cryptosporidium.
• we have included the measures required to comply with the revised lead parameters;
• We have included the Llangefni sewage treatment scheme.

The revised price limits set out on the attached table will apply from April 2001 with the result that the average household bill in 2004-05 could increase by a further £6.80.

I attach at Annex C a revised Notified Item. The symmetrical Notified Item model used by the Competition Commission, together with the new projections of optional meters will be incorporated into the interim determination.

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 Bob Macey (NAfW), Alan Davis (DETR), Michael Rouse (DWI), Roger Thomas (Environment Agency for Wales), Raymond Roberts (Chairman of CSC for Wales), to all members of the National Assembly for Wales, 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