What's new
Related documents
About the charging principles and guidelines
These principles and guidelines for water and sewerage service charges are a central part of our new approach to approving companies’ charges schemes as set out in IN11/07: Approval of charges 2012-13 (PDF).
They are drawn from previously published RD letters, MD letters, our future strategy for customer charges for water and sewerage, and our annual water and sewerage charges reports.
- Our principles set out our minimum requirements for charges, largely based on companies’ legal obligations.
- Our guidelines set out the information, checks and policies that companies should have in place as evidence that they have complied with their duties and obligations and our principles.
- Our good practice sets out our view of how companies’ charges can meet our principles and guidelines and things that companies could consider in setting their charges.
Companies’ charges must meet our principles. We will expect companies to follow our guidelines unless they are able to demonstrate that their charges meet the over-arching principles using an alternative method.
Charging principles and guidelines for 2012-13 charges
We published a formal consultation on our proposed approach to approving companies’ charges schemes which closed on 7 October. We have also discussed these charging principles and guidelines through three workshops with companies and the Consumer Council for Water. We invited comments from other stakeholders on the ‘work in progress’ version we published on our website on 14 October.
Our charging principles, guidelines and good practice will form the basis of our approval of charges schemes for 2012-13. Our information notice on the charges approval process for 2012-13 explains how we have taken into account feedback on the proposed approach. We describe below how we have taken into account the feedback on the principles and guidelines.
Changes made in response to stakeholder feedback
In our first draft, we proposed that companies provided assurance against both principles and guidelines. Companies expressed concern that it would be extremely difficult for their Boards to sign an assurance against this volume of detailed requirements. They also noted that this could stifle any potential tariff innovations.
However, several workshop attendees commented that they would find it useful to have detailed information of our position on various charging issues in one place. We therefore restructured the document to clearly separate high level principles and guidelines, but also to set out good practice.
Workshop attendees noted that the draft principles went beyond the companies’ legal obligations and included our interpretation of the legislation. Some attendees thought that the principles should only state the legal obligations, while others thought they should give Ofwat’s interpretation. Since we will expect companies to assure us that they have met their legal obligations as well as our principles, we have not limited our principles to legal obligations. While most of the principles clearly link to those legal obligations, they go further than this to include all the things companies must do to meet our requirements for charges schemes.
Most respondents said that the draft principles and guidelines were too prescriptive. We have reduced the level of prescription and developed more general guidelines, instead of guidelines that are specific to particular charges. Some respondents also thought we should distinguish between mechanistic requirements, such as the principal statement and tariff differentials, and issues of judgement, relating to condition E. However, the reduction in the level of prescription means that there are now fewer mechanistic elements to our requirements. We have therefore decided not to make these distinctions.
We have made clearer distinctions between:
- what companies must do (principles)
- what they should do unless they have good reason not to (guidelines)
- what we think is a good approach (good practice)
Further development of charging principles and guidelines
Beyond 2012-13, we will further develop these charging principles and guidelines. They need to provide a robust basis for approval of charges in future years, taking into account our statutory duties and any changes in legislation or policy. So, for example, we will review the principles and guidelines during 2012 as part of our work on consumer protection with the intention of making changes for the 2013-14 approval of charges.
This will be a living document which will evolve as new charging issues arise. We will, however, aim to close the principles and guidelines to further changes before each charges round, so that companies have a fixed point of reference for that year.
|
