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Information notes
New connections to the main or sewer Introduction Water and sewerage companies in England and Wales have duties under the Water Industry Act 1991 (WIA91) to make connections to their networks. This note explains the work involved in providing a new mains water supply or connection to a public sewer and how the companies recover the costs of this work. Charges vary depending on whether the supply is for domestic purposes or non-domestic purposes. What work does a new connection involve? Providing new connections can involve the following activities. i) Laying a service pipe or drain and making the connection to the water main or sewer (service connections). ii) Laying a new water main or sewer if there is none nearby (requisitions and self-lay). iii) Upgrading the local distribution network or sewerage network including local service reservoirs or local pumping stations. iv) Developing resources, if water resources are already fully committed (including bulk mains and treatment plants) or increasing the capacity of the sewage treatment works. The WIA91 allows companies to recover the costs associated with i), ii) and iii) above from customers asking for the new connection. These are the same for domestic and non-domestic supply connections, unless otherwise stated. The costs of works under iv) are included in the companies' price limits. Price limits are the amount by which companies can increase charges over and above inflation each year to finance their services and meet their legal obligations. We set a price limit for each company for each year. Service connections If you ask a company to lay a new service pipe to replace an existing connection to a property, for example during redevelopment, the company is entitled to levy a connection charge to cover the costs of this work. The charge for domestic connections covers the direct cost of works and materials needed to connect the customer's property to the company's main or sewer. This includes the cost of providing that part of the service pipe that the water company owns, the boundary stop tap valve, and the water meter. The charge should broadly reflect the cost of the work. Most companies have standard charges, calculated by the length of pipe laid or the amount of excavation that is needed. Some companies calculate charges based on the actual costs incurred. Companies can set conditions before making the connection, including asking customers to pay a deposit. We can settle disputes between customers and companies about the work needed to make domestic and non-domestic connections. These include: We normally only consider water connection charge disputes that are referred within two years of the connection being made. Usually property owners can carry out the work to make sewer connections and where the company agrees to this they do not pay a connection charge to the company, but may be required to pay an inspection fee. Laying a new water mains or sewer Requisitions If the existing system needs extending before the customer can connect into it, the customer may need to ask the company for a new water main or public sewer. Where the supply is for domestic purposes, this is called requisitioning and the requisition can be made by the property owner or occupier, a developer, or by the local authority ("the requisitioner"). Requisition charges The requisition charge reflects the costs reasonably incurred in carrying out the work. The nearest main or sewer may have insufficient capacity to provide the new supply so the charge may include all piping and pumping works (network reinforcement) to bring the supply from the point where capacity is available. The charge may also include a proportion of the cost of mains or sewers which have already been laid, but were oversized in anticipation of further demand. Customers requisitioning a water main or sewer are generally expected to pay both connection and infrastructure charges in addition to the charges for installing the pipes. Payments The requisitioner can choose to pay for the work over a period of 12 years (known as annual relevant deficit payments) or as a single lump sum (called the discounted aggregate deficit). The annual deficit amount is calculated as the difference between the annual cost of borrowing to pay for the work and the water/sewerage charges payable for the newly connected properties. The annual borrowing cost is calculated at a rate of interest which we approve. Disputes Any dispute about the amount charged, the requirement for deposits in advance of the works, or the position or route of the new pipe may be referred to us for determination. Laying your own water pipes A developer (or its own contractor) can enter into an agreement with a water company that the developer will install the main and service pipes instead of asking the company to do so. The water company takes over responsibility for (adopts) the pipes once installed. This is known as self-lay. In March 2002, we issued guidance on how self-lay should be put into practice in the document, 'Competition in providing new water mains and service pipes' (revised August 2005). In May 2004, when the Water Act 2003 provided a legislative framework for self-lay, we issued our 'Guidance on financial arrangements for self-lay and requisitioning agreements'. All companies have self-lay policies setting out the standards that must be met. Water companies can recover the reasonable costs incurred for network reinforcement where required. The company must make a payment (known as the 'asset payment') for the new main reflecting revenue that will be received from properties connected to it. Disputes about the terms and conditions offered for an adoption agreement, including the amount the company proposes to pay for the main can be referred to us for determination. Infrastructure (or network) charges If you ask for a new connection to a property the company is entitled to levy infrastructure charges for domestic connections (or network charges for non-domestic connections). This is in addition to connection charges. Infrastructure charges are average charges, intended to cover the costs that companies incur in enhancing the network of mains and sewers to meet the extra demand created when new properties are connected. When we last set price limits in 2004, we determined limits of £239 for each service for all standard water and sewerage domestic infrastructure charges. The limit only rises in line with inflation each year. Infrastructure charges should not finance the costs of increasing water resources and treatment capacity. We believe that these costs should be recovered from the whole customer base through their annual charges. In certain circumstances, the infrastructure charge limit is increased by a multiplier which reflects the potential for extra use of water. This is based on the number and type of water fittings in the property (the loading). The basis on which these loadings are to be calculated is set out in each company's licence. This can apply where: If a site is re-developed, or a building converted, companies must make a credit for water usage at the site within the past five years. In our view, infrastructure charges do not have to be paid in advance of the connection to the main or sewer, but are recoverable as soon as the connection is made and the premises are supplied with water. What other information is available? For further information Send an e-mail to enquiries@ofwat.gsi.gov.uk Contact our library on 0121 625 1361 Visit our website at www.ofwat.gov.uk Information Note No 7 – October 1991 (revised December 2007)  |
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