There are misunderstandings about what is happening

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Answers to frequent queries and comments from customers and stakeholders

In our discussions with customers on the introduction of site area charging for surface water drainage by some companies the following queries and comments have been raised, often by churches and charitable organisations. We have responded directly to these as they have arisen and we believe it is useful to set out our position on the most frequent comments for clarity.

"Churches and charities used to be exempt from charging"
Some people believe that in the move from RV-based charging to site area based charging an exemption from charging for water and sewerage for community halls, churches, scout huts etc has been removed. This is not the case. There has never been an exemption from water charges under law. No customer is exempt from paying water and sewerage charges if they receive a service.

"Ofwat is not applying Government's guidance on charging"
Some churches have also stated that Ofwat is misapplying Secretary of State's guidance (relevant extract from Water Industry Act 1999 'Delivering the Government's Objectives'). They believe that the guidance instructs Ofwat to ensure that water and sewerage companies charge charities and churches differently, and that this means they should not pay standard non-household charges.

However the guidance says:

"The principle should be that those making similar demands on services should be charged on the same basis."

This guidance also says (and this is what has been quoted):

"It would be inappropriate to charge all customers as if they were businesses."

Some customers have taken this to mean they should not be charged in the same way as other non-household customers. Ofwat interprets this as applying in situations where there is a valid reason not to charge a premises (like a church) as a business. For example, it would be inappropriate to insist on installing a large meter if the premise is a church or charity and therefore only has limited facilities, whereas this might be appropriate for a business. However, in our view, there is no reason why a church or charity should not pay for surface water drainage in the same way as a business as both the church, charity and the business would be making a similar demand on the service.

We believe that charging all non-household premises by site area complies with the Secretary of State's guidance.

"Companies are making extra profit out of this new charge"
Some customers have indicated that they believe charging by site area is a way for companies to raise extra revenue. This is not the case. Some customers, may see bill increases if they were not previously paying a charge that reflected the costs they were imposing on the system. Other customers who were previously paying more than the costs they were imposing will see their bills decrease.

These points are discussed further below.

Why did some customers, i.e. churches and charities, have no or very low surface water drainage charges before?

Some companies that have recently changed to site area charging, such as United Utilities, previously based their surface water drainage charge on the rateable value of the premises. The rateable value is set by the Valuations Office.

Previously some non-domestic premises such as churches, schools and charitable organisations were given zero or artificially low rateable values. This meant they either had no charge for surface water drainage or a small nominal charge imposed by the company.

Therefore these premises were either not paying at all, or paying very little, for a service they were receiving. This meant that other customers previously subsidised these customers through higher bills.

Did some churches and charities previously have an exemption from surface water drainage charges?

No customer has ever been exempt from water charges under the law. The change in surface water drainage bills is because of a change in the method of allocating the charge across customers, not because an exemption has been removed.

If churches and charities had low surface water drainage bills before who paid for the service they were receiving?

Other customers have previously subsidised churches and some charities, under the RV based system, through higher bills.

Why is there an exemption for churches and small charities in Scotland?

There is a different system of charging for water in Scotland than in England. Scottish water is publicly owned, therefore rather than being cross-subsidised by other bill payers the churches are subsidised by the tax payer.

The Scottish Government recently announced that churches and small charities would remain exempt from water charges until 2014. This is the continuation of something which has been in place in Scotland for more than 50 years, but does not exist in England.

What is the Government's view on the changes to surface water drainage charges?

Phil Woolas' view is explained in the following parliamentary question response (see column 421W).

How much are customers' bills increasing by?

Bills will depend on the size of the building, its non permeable car park and any other non permeable areas. The larger the impermeable area the larger the surface water drainage bill. Permeable areas, such as burial grounds and grassy areas will not form part of the chargeable area.

Surface water drainage is assessed by bands of surface areas. For example, in United Utilities' area, the site area based charges are being phased in over three years. The surface water drainage bill will be 1/3 site area based and 2/3 rateable value based for 2008/09. The site area element for 2008/09 will be:

for 300-649m², £181.67,
for 650-1,499m², £411 and
for 1,500-2,999m², £860.

These charges include highway drainage charges which typically account for around 50% of the overall charge. In 2009/10 the surface water drainage charge will be 2/3 site area based and 1/3 rateable value based and in 2010/11 the charge will be completely site area based.

Only the largest properties, for example a cathedral's area-based charges are likely to be above these bands. Other companies' charges are of a similar level. This means the percentage increases in charges to some customers, particularly churches and charities, while being very large, are because customers are moving from no charge to a charge that is much more reflective of the costs they create.

Are water companies making more money?

No. Although some customers are seeing these charges for the first time, water companies are not raising additional revenue through introducing site-area drainage.

Any new distribution of charges which removes a cross-subsidy will mean that some customers see their bills rise, while others pay less. The overall income for the companies concerned remains the same under the new system.

What happens if I don't pay my surface water drainage charge?

Customers are legally obliged to pay for surface water drainage if it is a service they are receiving from their sewerage company.

Not paying this charge may lead to the company taking the customer to County Court to recover outstanding debts and could ultimately result in the disconnection of the water supply. The water company may also recover costs and fees from the defendant in accordance with the rates stipulated by the Lord Chancellor's Department as varied from time to time.

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