MD 199: Licence Condition N amendment - Running costs of the Consumer Council for Water (CCW) and Ofwat renewal fee

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Ofwat home > Publications > Letters to Managing Directors

MD199

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

20 January 2005

LICENCE CONDITION N AMENDMENT - RUNNING COSTS OF THE CONSUMER COUNCIL FOR WATER (CCW) AND OFWAT RENEWAL FEE

On 25 November 2004 Condition N was modified to permit the Secretary of State, the National Assembly for Wales and the Director to recover the costs of establishing the CCW which will come into being on 1 October 2005. This letter is to consult the appointed companies on a change to Condition N, in order to recover the annual running costs of the CCW.

Proposed Amendments to Condition N

Section 37 of the Water Act 2003 empowers Ofwat to modify conditions so as to introduce a mechanism for recovering the running costs of the CCW. A new paragraph (2.9) will be added to Condition N to recover the annual running costs of the CCW.

Proposed wording of paragraph 2.9

[N.2.9 within 30 days of the date on which the Director notifies the Appointee of the [annual] amount payable under this sub-paragraph, the amount derived from the following formula:

J = G x t/T

where

J is the amount payable under this sub-paragraph;

G is, for the Charging Year starting on 1 April 2006, the sum of £x(

) million, and for each subsequent Charging Year £x million multiplied by the Retail Price Index for the month of November in the Prior Year over the Retail Price Index for November 2005;

t is equal to the turnover of the Appointed Business as shown in the accounting statements prepared by the Appointee under Paragraph 4 of Condition F for the financial year ending twelve months before the start of the Charging Year in which the payment under this sub-paragraph is payable;

T is equal to the aggregate of the turnover of the Appointed Business of all of the companies holding an Appointment under Chapter I of Part II of the 1991 Act, as shown in their accounting statements prepared under Paragraph 4 of Condition F for the financial year ending twelve months before the start of the Charging Year in which the payment under this paragraph is payable.

NOTE: Retail Prices Index is defined in Condition A.3.

There will be a charge for the financial year 2005-06 based on circa half the annual estimated running cost of the CCW. This will be confirmed by Defra and the Welsh Assembly Government. An initial estimate for 2005-06 is £2.8 million. This will be confirmed to companies in April 2005.

Paragraph 3

Amend heading to read:

"Limits on renewal fee, special fee and additional fee applied to Ofwat."

Paragraph 3.1

At the end of the last price review (PR99) the renewal fee was rebased to the fee charged in the final year of the review. It is proposed this change is repeated as PR04 has now been concluded. The fee charged in 2004-05 was £13.8 million and this will equal "S" in the formulae in paragraph 3.1. In 2005 "S" will be reduced by an amount reflecting the movement of resources when WaterVoice transfers to the CCW.

This consultation ends on Monday, 21 February 2005. Responses can be emailed to joanne.thomas@ofwat.gsi.gov.uk

Philip Fletcher

(*) will be determined by Defra & the Welsh Assembly Government

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