THREE VALLEYS WATER A summary of our Business Plan Submission to Ofwat - April 1999

OVERALL STRATEGY FOR THE AMP3 PERIOD AND TOP STRATEGIC OBJECTIVES A survey of our customers gives a clear message of their expectations and priorities: - A safe supply of drinking water - Fewer discolouration problems - Fewer short term supply interruptions - Improved long term reliability of the supply Although a great many (one third) would be happy to pay higher prices for an improved service, the majority of our customers are only willing to accept price increases in line with inflation. The overall conclusion from our customer consultation is quite clear : We should aim to deliver the best possible service that is affordable with prices remaining constant, in real terms, at their current level. Working within this price ceiling, we believe that we have developed a balanced strategy which takes into account the following: - Meets all statutory water quality requirements, including the new EU Water Quality Directive - Provides a secure and reliable supply while protecting the environment - Provides free, optional metering, with a free reversion option, to all domestic customers - Maintains the serviceability of our assets - Maintains and improves our high level of service to our customers

PROPOSED PRICE LIMITS & EFFECT ON AVERAGE BILLS								TOP 5 QUALITY IMPROVEMENTS IN 2000-2005 PERIOD
		2000-01	2001-02	2002-03	2003-04	2004-05			1. To continue the provision of treatment at sources vulnerable to Cryptosporidium.
1	Proposed Price Limit (Water Service)	-0.10%	3.30%	3.30%	3.30%	3.30%			2. To continue work on the distribution system to reduce iron concentrations and to overcome aesthetic quality problems.
2	Average Household Bill (today's prices)	113.85	115.28	116.81	118.67	120.84			3. To Invest to reduce the impact of plumbosolvency on our customers
3	Average Household Bill paid	124.66	129.38	134.37	139.93	146.04			4. To provide additional treatment required to meet the standards of the new EU Directive.
1	Proposed Price Limit (Sewerage Service)								5. To work with the Environment Agency to provide solutions to environmental problems. - Timing dependent upon Ofwat funding.
2	Average Household Bill (today's prices)
3	Average Household Bill paid

PROJECTED EXPENDITURE NEEDS		Annual average for the AMP3 period (£/property/annum)					WHAT IS DRIVING THE CHANGES IN BILLS		£
1	Total Operating Expenditure - annual average	66.03					Less	Average household bill in 1999-2000	115.99
2	Total Capital Maintenance Expenditure - annual average	27.94						(1) passing on past out-performance	-9.29
3	Total Capital Enhancement Expenditure - annual average	34.87						(2) challenging targets for future efficiency improvements	-7.47
							Plus	(3) the impact of improvements in water quality	8.49
	RETURN CAPITAL	Annual average for the AMP3 period						(4) improvements in service performance	0
1	Return on capital - (post tax) (%)	6.75%						(5) Maintaining security of supplies to all customers	13.12
								Average household bill in 2004-2005	120.84

For further information contact : Tom Chapman or David Shore at Three Valleys Water tel: 01707 268111 fax: 01707 277146 e-mail: tchapman@3valleys.co.uk