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Reports on water companies
Non-household customer information How non-household customers are charged Your charges for water and sewerage typically vary according to the volume of water that you use and the volume of wastewater or trade effluent that you discharge. Smaller non-households usually pay the same volumetric rates as household customers, although the standing charge may differ according to the size of your water meter (see standard non-household charges). All of the companies offer reduced rate tariffs if you are a large water user, reflecting the lower costs of supplying you. All water and sewerage companies also offer reduced rate tariffs to large sewerage customers and most do the same for large trade effluent customers. Regulating large user charges We amended companies' licences in April 2000 to remove large users from the tariff basket (see price limits and average bills section for an explanation of the tariff basket). According to section 7(a) of condition B of companies' licences, you will currently be defined as a large user if you are, or are likely to be, supplied with not less than 50 million litres (megalitres – Ml) of water a year by a company in England. For companies largely operating in Wales the threshold is 250 Ml of water a year (see MD194, 'Proposed licence modifications: conclusions'). The wording of this part of the licence allows for the volume threshold to be adjusted automatically to the amount specified in any order that the Government makes under section 7(6) of Water Industry Act 1991 as amended by section 40 of the Competition and Service (Utilities) Act 1992). Because of this, if you are supplied with 50 Ml a year or more, your charges are not subject to the price limits that we set. We removed these charges from the tariff basket because we considered that large users formed part of an emerging competitive market so their charges did not require the same degree of regulation as those for other groups of customers. Nevertheless, large user charges are still subject to the requirement that they must be neither unduly preferential nor unduly discriminatory. The principles that underpin our approach to large user tariffs are listed below.
As far as possible, we expect companies to justify their large user charges on a robust allocation of accounting costs over the classes of customers concerned. We noted in MD159, 'LRMC and the regulatory framework', that failure to do this would be the principal means by which we would assess abuses of market power and undue discrimination. Large user charges should also take note of robust estimates of long run marginal cost (LRMC). This is particularly important in areas where water resources are constrained. Please refer to MD170, 'The role of long run marginal costs in the provision and regulation of water services', for further information on the role of LRMC in tariff setting. We monitor year-on-year changes to the difference between large user and household charges to make sure that the charges for both groups of customers are neither unduly preferential nor unduly discriminatory. Sample bills We provide sample bills for business customers in the historic charges and sample bills section.Standard non-household charges for water If you do not have a meter, you will pay according to each company's household unmetered charges (see household data). If you have a meter you will normally pay for your water through a:
The metered water charges for non-households table shows the standing charges that you will pay for your meter size. If you are a larger non-household customer, you may qualify for large or intermediate user tariffs (see the large and intermediate water charges section). If you use less water than the threshold for these reduced rate tariffs you will normally pay the same volumetric rate as metered household customers (see household data). However, Anglian Water has separate charges for its non-household customers. For details of these charges, please see the large and intermediate user charges for water – water and sewerage companies and water only companies tables. Large and intermediate water charges Most companies' large user tariffs comprise a standing charge and a lower than standard volume-related charge. Some of these tariffs have an additional fixed charge and a lower volumetric rate for all water used. Some have a lower volumetric rate for all consumption above a certain threshold, with no fixed charge in addition to the standard meter-based standing charge. Both types of tariff structure minimise the incentives for you to use more water solely to qualify for the tariff. The large and intermediate user charges for water – water and sewerage companies and water only companies tables show companies' water charges for large users for 2008-09. The following alternative forms of large user tariffs are currently available in some companies' areas. Seasonal tariffs The following companies currently offer seasonal tariffs to non-household customers:
Subscribed demand tariffs The following companies currently offer subscribed demand tariffs:
A subscribed demand tariff usually comprises:
You have to forecast your maximum daily demand at the start of the year. So, you will need to talk to your supplier about likely future demand. Companies say they have found this dialogue useful as a means of establishing a serious discussion about water use (and the potential for water conservation) with their large users. Interruptible tariffs The following companies currently offer interruptible tariffs:
We have agreed operating rules with these companies to make sure that if you are on an interruptible tariff you are capable of managing supply interruptions. For example, we encourage companies to conduct at least one test interruption for each customer a year. Reserved capacity charges for stand-by supplies If you have access to supplies from, for example, a borehole or an on-site effluent treatment plant, you may only require back-up supplies if your own supplies fail. If you are a customer in this situation, you will have particular cost characteristics and may require a dedicated suite of reserved capacity or stand-by charges.
Currently, six companies offer standard reserved capacity (see the reserved capacity (stand-by) charges for water table). Other companies may be willing to offer reserved capacity charges by special agreement. Severn Trent Water and Yorkshire Water calculate their reserved capacity charges by applying a volumetric charge to the volume customers reserve. Anglian Water, Bournemouth & West Hampshire Water, United Utilities and Wessex Water base their charge on customers' maximum daily demands, like a subscribed demand tariff. Bournemouth & West Hampshire Water also offers a surplus capacity charge for customers with an oversized meter and unpredictable demand levels. Charges for non-potable water Some companies supply non-potable water to industrial customers. The charges for these supplies are shown in the comparison of non-potable water volumetric charges with standard and large user potable water volumetric charges table. In general, non-potable charges have increased this year by a similar proportion to the increase in potable charges. We accept that the volumetric charge for non-potable water will be lower than that for a comparable potable supply because it does not include the cost of treating water to potable standard. Sewerage charges The sewerage services you receive are for collecting and treating:
Charging for foul sewerage If you are a metered non-household customer, your charges for the foul sewerage service will normally be based on the volumes recorded on your water meter (adjusted where appropriate for water which does not return to the sewer). The level of your standing charge will depend upon the size of your meter. Details of these charges are in the metered sewerage charges for non-households table. If you are an unmetered non-household customer you will normally pay for foul sewerage according to a charge based on the rateable value of your property. These charges are outlined in the household customer information section. All companies, except for Anglian Water and Northumbrian Water, base the metered non-household standing charge on meter size. For more details on these companies' charges, please see the large and intermediate user charges for sewerage table. United Utilities, Southern Water, Thames Water and Wessex Water have non-household sewerage standing charges that are higher than average. This is because these companies include the costs of both surface water and highway drainage within the sewerage standing charge. However, United Utilities only applies non-household sewerage standing charges to non-household customers that do not have a charging value for surface water and highway drainage. Dŵr Cymru also has non-household sewerage standing charges that are higher than average, because they include a charge for highway drainage. Large user tariffs for foul sewerage The principles that each company should apply when setting large user tariffs for water should also apply when it sets large user tariffs for foul sewage or trade effluent. So, companies typically justify their large user tariffs for foul sewage or trade effluent on the basis that large customers make less use of the reception and conveyance part of the service. The large and intermediate user charges for sewerage table provides details of companies' large and intermediate sewerage charges. All of the water and sewerage companies now offer large user tariffs for foul sewage. With the exception of Wessex Water, companies offer a simple two-part tariff. Wessex Water's sewerage tariff is the same as the one it offers to its large trade effluent customers. Charging for surface water and highway drainage Historically, companies have charged for surface water and highway drainage services in a variety of ways, including:
Surface water drainage (SWD) Following our review of SWD charges, in RD35/03, 'Surface water drainage – charging policy', we said that charges are fair if they accurately reflect the costs of providing the SWD service. These costs generally depend upon:
Four companies charge for SWD on a site area basis. Severn Trent Water introduced this method of charging in 1990-91 and Yorkshire Water did the same in 2001-02. Northumbrian Water began to introduce this method of charging on 1 April 2005. All of Northumbrian Water's non-household customers will be charged in this way in the 2008-09 charging year. United Utilities introduced site area charging for new non-household customers from 1 April 2007. It is phasing in these site area charges for existing customers in 2008-09 and will complete this in 2010-11. In MD152, 'Approval of companies' charges schemes in 2000-01' we required all companies to offer rebates for SWD to customers who do not benefit in any way from this service. All ten sewerage companies now do this. We do not, however, expect companies to backdate rebates for periods before the current charging year. If companies were to do this, they would expect to backdate corresponding increases in charges for customers who are connected for SWD. We do not consider this to be either practicable or desirable. Generally, companies will offer you the rebate in a form similar to that offered to household customers. If you would normally pay a site area-based charge for SWD you will be exempt from paying this charge if you do not receive a surface water drainage service. In RD35/03 'Surface water drainage – charging policy', we also encouraged each company to consider giving partial rebates to non-household customers who can prove that some of their surface water drains away from the public sewer. Highway drainage See the household customer information section for a discussion of companies' approaches to charging for highway drainage. Trade effluent charges Charging for trade effluent The costs of collecting, treating and disposing of trade effluent depend upon the volumes and strengths of the wastewater. However, unlike foul sewerage, companies assess for charging purposes the strength and volume of trade effluent before it enters the sewers. Charges for trade effluent are based on the Mogden formula, which is given below. Charge per unit of effluent = R +[(V + Bv) or M] + B(Ot/Os) + S(St/Ss) This formula links charges to the volume and strength of the discharges from your premises, which determine the level of treatment needed and therefore the costs involved. Each company calculates the average costs for its region, so the charges do not reflect the costs incurred at any one treatment works. Companies may reduce the collection charge for customers who discharge directly to the treatment works. United Utilities offers, on an optional basis, a reservation charge for trade effluent customers. The charge comprises a:
The balance between trade effluent volume and strength charges In recent years, there has been a trend for companies to adjust the relative balance of their volume and strength charges within the Mogden formula. Some companies increased their charges for receiving and conveying trade effluent, while decreasing their charges for biological treatment and the treatment and disposal of sludge. We accept that any such changes to the Mogden charges can be justified if they result in a more cost-reflective reception and conveyance charge on the one hand and treatment charge on the other. For example, five companies have split the secondary treatment charge into two elements (B and Bv) to reflect the load- and volume-related costs associated with secondary treatment (see the standard trade effluent charges table). We think that this refinement has enabled companies to achieve a better balance between the different treatment elements within the current Mogden charging formula. However, we require robust calculation of the cost-reflective level for the Mogden charges to allay concerns that companies could be engaging in anti-competitive pricing for treatment services. Large user trade effluent charges All the companies, except Northumbrian Water now offer a large user trade effluent tariff. Northumbrian's tariff reflects the costs of supplying its trade effluent customers, the majority of which are large users. Dŵr Cymru, Severn Trent Water, South West Water, Southern Water, United Utilities and Yorkshire Water offer a reduced charge for collection (that is, a lower 'R' charge). Anglian Water, Thames Water and Wessex Water offer reduced charges for both collection and treatment (that is, lower 'R', 'V', 'B' and 'S' charges). Details of large user trade effluent charges for 2008-09 are shown in the large user trade effluent charges table The balance between metered foul sewerage and trade effluent charges We expect to see an appropriate balance between the charges for trade effluent and for domestic foul sewerage. For a given volume of effluent, differences between bills for domestic and trade sources should only be related to differences in strength. Similarly, for effluent of a given strength, differences in bills should only reflect any difference in the volume of effluent. We use a simple test to check the balance between sewerage and trade effluent charges. We subtract a notional trade effluent charge for domestic strength effluent from the metered sewerage volumetric charge. (RD26/00 'The household sewerage/trade effluent differential: confirmation of adjustments to Ofwat methodology' explains how we calculate the notional trade effluent charge.) We consider that domestic sewerage and trade effluent charges are broadly in balance if the difference falls within a range ±5p/m3 (see MD152). The metered household sewerage and trade effluent charges differential table shows the difference between the metered sewerage volumetric and notional trade effluent charges for sewage for 2007-08 and 2008-09. For all companies the differences between the domestic sewerage and trade effluent charges fall within the desired boundaries of ±5p/m3. Other charges If you connect a property to a company's water main or sewer, you will pay a connection charge to cover the direct costs of work and materials required. Companies will generally allow you to make the connection to the sewer yourself. If a company insists on doing the work, we can determine a reasonable connection charge. Most companies, however, insist on making the physical connection to the company water main, although you may be allowed to do some of the preparation, such as the excavation, pipelaying and reinstatement work. A few companies allow developers to make connections in accordance with appropriate standards. Most companies have established a scheme of standard charges for water supply connection work. Such schemes should be flexible and reflect the costs that are likely to be incurred in connection work. We do not approve connection charges, but we have powers to settle disputes between customers and the companies about charges for connecting to the water supply. We expect each company to carry out a meaningful review of its costs when a customer complains or asks them to do so. As a result, the number of requests we receive for determination of a dispute remains low. During 2007-08, we needed to make only one determination, and in this case the company was found to have charged excessively. In addition we have powers to determine disputes about the charges that the companies make in respect of requisitioned mains, sewers and lateral drains and asset payments the companies make in respect of self-laid mains. We published our 'Guidance on financial arrangements for self-lay and requisitioning agreements' in 2004. We have decided 4 disputes and resolved a further 27 complaints on an informal basis to date. Infrastructure charges Each company can raise infrastructure charges for connecting premises for domestic purposes to a public water main or to a public sewer for the first time. We set an upper limit on this charge. At the 2004 price review, we set the maximum infrastructure charge at £260.15 for each service for 2005-06, to be indexed subsequently each year in line with inflation. The maximum infrastructure charge for 2008-09 is set at £288.64. Where a supply is provided by a single, larger (non-standard) service pipe, for example a hotel or block of flats where a management company is responsible for water charges, the infrastructure charges are calculated by reference to the number and type of water fittings. Miscellaneous charges Many companies include a number of non-standard charges within their approved charges schemes. These 'miscellaneous charges' cover a variety of services which companies may provide as a water undertaker, but which are not included within the tariff basket. Examples include:
Disconnection for non-payment If you are a non-household customer your water company can disconnect your supply if you do not pay your bill. However, this is not the case if your property is classed as mixed-use premises. Mixed-use premises are those with a shared supply that includes a dwelling (within the meaning of paragraph 1(1) of Schedule 4(A) of the Water Industry Act 1991) that is occupied by a person as an only or principal home, but which is also used for a non-domestic purpose. Examples of such premises include caretakers' accommodation within an office block, and public houses with residential quarters. Our view (as set out in RD14/04, 'Disconnection of mixed use premises for non-payment of water charges – guidance to water companies') is that the water companies cannot disconnect mixed-use premises for non-payment of bills where any part of the premises constitutes a private dwelling house. However, this point cannot be finally decided until the law is clarified either through precedents established in case law or through subsequent legislation. Competition The current competition regime came into force in December 2005. However, competition under the water supply licensing regime is severely limited by legislation, is confined to a very small number of customers and has not developed successfully. We consider that effective competition has the potential to generate benefits in a range of water and sewerage services:
To date, we have published four papers as part of our review of competition:
In our recently-published document, 'Ofwat's strategy – taking a forward look', we set as a priority to introduce competition progressively where it benefits customers and to maintain effective regulation where it does not. Looking ahead we have outlined the following actions for the coming years:
Under the current regime, we have concurrent powers under the Competition Act 1998 (CA98) with the Office of Fair Trading to investigate anti-competitive behaviour in the water and sewerage sectors in England and Wales. For more information about competition in the water and sewerage industry, please see our competition pages.  |
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