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

13 September 1999

 APPROVAL OF COMPANIES CHARGES SCHEMES IN 2000-2001

In June 1999, I published the consultation paper Approval of Companies' Charges Schemes 2000-2001, which set out my proposals for implementing my newly acquired statutory powers – under the Water Industry Act 1999 – to approve companies' charges schemes and to oversee companies' policies relating to the installation of optional meters. I asked the Customer Service Committees (CSCs) to reply on behalf of customers and welcomed views from other customers, customer groups, and, of course, from water companies.

The consultation period ended on 13 August 1999 and I have now considered the responses that were received. In the consultation paper I said I would write a public letter to the water companies in early September 1999.

Attached to this letter is a paper, which summarises the responses to the consultation paper and my conclusions on the policies which companies will need to follow in order to have their charges schemes approved. Also in the paper is a checklist indicating the areas that a satisfactory charges scheme should cover.

The reduction in prices in April 2000 provides an important opportunity for companies to make changes to tariffs so that they better reflect costs. I expect companies to take this opportunity.

In RD 19/99 Tony Ballance said that draft charges schemes should be submitted to Ofwat by 30 September 1999, to ensure that proper discussions can take place in the tariff meetings with companies during October and November, and to allow Ofwat to give all companies written comments on the draft charges schemes by 15 December 1999. We will also be providing written comments to CSCs on the schemes at the same time. This process would enable charges schemes submitted in January 1999 to be handled effectively, allowing companies to keep to their billing schedules.

As this letter is being issued later than expected, and as the original deadline was already tight – as a number of companies have argued – we will accept draft charges schemes until 7 October 1999. Draft charges schemes should be based on my draft determinations of price limits published in July 1999.

Since the publication of the consultation paper, the Department of the Environment Transport and the Regions (DETR) has published the Secretary of State's draft Guidance to me on the exercise of my powers to approve companies' charges schemes for those companies operating wholly or predominantly in England. The policy conclusions in the attached paper have regard to the draft Guidance. If the Secretary of State's final guidance leads me to make any changes to my policy conclusions we will tell you.

Ministers are also drawing up draft Regulations (for companies operating wholly or predominantly in England) which are expected to be published in September. Once draft Regulations are published, companies should submit to Ofwat draft text setting out how these draft Regulations will be incorporated into their charges schemes, and how they will operate the new requirements, in particular the charging protections for vulnerable groups. I could not approve charges schemes for 2000-2001 unless I was satisfied that companies had made adequate arrangements for the administration and audit of the proposed Regulations on protecting vulnerable groups.

 I C R Byatt