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MD197

TO ALL MANAGING DIRECTORS OF
WATER AND SEWERAGE COMPANIES
AND WATER ONLY COMPANIES

I consulted formally with you and others on my draft AMP4 change protocol on 5 August (MD193). We are grateful for all the comments and suggestions we have received. We have now considered all the responses. We have been able to take on board a number of helpful suggestions and clarifications.

Our final determinations clarify in some detail our expectations for the improvements that you will be delivering over the next few years. We all hope that changes to these requirements will be at a minimum so that you can optimise your business around delivering all the requirements economically and efficiently. However we recognise that you do need clarity on how we expect you to deal with changes that will occur.

The attached AMP4 change protocol sets down the procedures Ofwat has established for dealing with changes to the funded improvement programmes for the period 2005-06 and 2009-10 (AMP4). Broadly, the protocol builds on the approaches to these issues that have evolved from inception of the new regulatory regime in 1989. The protocol is an Ofwat document setting down Ofwat's expectations as well as a reasonably straightforward structure for you to follow. The protocol does not cut across the roles and responsibilities of others in the regime be they Ministers, quality regulators, water companies or WaterVoice, but does provide a framework for dealing with change in an informed collaborative way that will enable progress to be made.

The protocol confirms our intentions on how changes will be taken into account, both at the next periodic review in 2009 and between April 2005 and September 2008, the last date for an interim determination application before the 2009 periodic review.

We have consulted widely on the protocol and I believe established a reasonable consensus on the processes and procedures set down. We shall carry out a review of the protocol in late 2006 to check whether it is working as intended. We shall update the protocol after this review if this is found necessary.

Philip Fletcher
Director General of Water Services
Enc.