Your application for a new appointment may be based on having your own source of water or sewage treatment works, but you can request use of an appointed water company’s assets under a bulk supply agreement.
You will need to negotiate the terms of each bulk supply agreement with the relevant appointed water company for the connection and ongoing supply of water or sewage treatment. You will also need to have this bulk supply agreement with them in place before we can grant your new appointment. Each bulk supply agreement is negotiated separately and different approaches have been used successfully in different situations.
Bulk supply pricing negotiation approaches
In many respects, a new appointee may often share the same cost characteristics as a large user from the relevant appointed water company’s point of view, such as:
- the delivery of a large amount of water to a single point of supply
- one customer to manage
- no use of the local distribution network.
We therefore consider it sensible for parties to use the relevant large user tariff as a basis for negotiations where the new appointee’s forecast demand qualifies. Any costs that the relevant appointed water company will incur or not incur as a result of the new appointee serving the site should be added or deducted, respectively from the bulk price.
Other approaches have been successfully used. For example, in previous negotiations, offers by existing appointed water companies have included tariffs based on:
- the relevant full standard volumetric tariff
- a retail-minus approach to costs.
Time constraints on negotiations for unserved sites
If you are applying for a new appointment to an unserved site, you will need to negotiate and reach agreement with the relevant appointed water companies about bulk supply and discharge arrangements for specific sites within time limits. This is because you can only apply while a site remains unserved and you need to ensure that the site’s developers obtain mains connections to meet their timetables for building.
Our policy principles on bulk pricing negotiations
We expect you and the relevant appointed water company to agree commercial terms in a timely, professional and constructive way.
An appointed water company must not delay its negotiations with you while it develops different charging mechanisms or because of its views on the unserved nature of the site.
It is important for both parties to progress to agreement of terms without delay, as we will not grant a new appointment until then. We expect an appointed water company to commence bulk supply negotiations with you as soon as you ask it to.
We expect the existing appointed water company, given their unique position in the market and the information base that this provides, to negotiate in good faith and to comply with all of its obligations and duties, including those arising from competition law.
If you cannot reach an agreement on terms for a bulk supply agreement (or become unhappy with terms that have already been agreed), we can make a determination of terms under the Water Industry Act 1991.
We will to consult the Environment Agency before making a determination, and we may also decide to consider the views of other stakeholders. We will share our draft determination with both you and the relevant appointed water company, and you will both be invited to comment. We will consider the comments before making a final decision.
You can find more information about the policies we apply in considering bulk supply agreements in Bulk supply agreements a statement of our policy principles.