Summary of case
This dispute was an appeal about the terms Bristol Water sought to include in a self-lay adoption agreement (the Agreement) for a development site.
Specifically the Complainant objected to the non-physical connection charge (administration charge) Bristol Water sought to recover for each of the service connections the Complainant will self-lay on the site.
Self-lay is where a development requires a new water main or sewer and a contractor is asked to do the work as opposed to the water or sewerage company.
Summary of Ofwat’s final decision
Our key conclusions were as follows:
- We considered it reasonable for Bristol Water to offer a term in the Agreement for the site requiring payment of an administration charge because we consider that these were costs Bristol Water incurs in administering self-laid service connections.
- However, we considered the level and timing of that charge should be different from that originally proposed by Bristol Water as a term in the Agreement.
- We considered that the level of the charge should be:
- £28.70 for the first connection at the site;
- £20.86 for any second and subsequent connections that are the first in a batch (phase) of connections; and
- £15.69 for any remaining connections.
- We considered Bristol Water’s payment terms for recovery of these charges should require payment of the appropriate charge after connections are made to ensure that the correct charge is recovered.
Wider lessons for companies and customers
- Section 51A of the Water Industry Act 1991 (the Act) provides for a water or sewerage company to enter into an agreement with, for example, a Self-Lay Organisation (SLO), to adopt water mains or service pipes at a future date. It also provides for the parties to an agreement entered into under this section of the Act, to agree wider terms as appropriate.
- Section 51A of the Act provides non-exhaustive examples of the terms which may be included in such an agreement, one such example concerns a term for the connection of a new service pipe to a company’s existing supply system. Although the list of terms set out in section 51A of the Act does not specify charges that may be charged by the company to an SLO, or developer, we consider that there is nothing in section 51A of the Act prohibiting a charge such as an administration charge from being agreed provided that charge is reasonable.
- As set out in our paper on Charging Rules for New Connection Services (English Undertakers), which was published in December 2016 and will apply from April 2018, charging arrangements must explain how each charge has been calculated or derived. Where an undertaker determines the applicable charges other than by fixed charges, the methodology for the calculation of such charges must be explained clearly in the charging arrangements.
- Charges must also be published with such additional information or explanation as is necessary to make clear what services are covered by each charge.
- As per Information Notice 1606, which is on assurance terms in self-lay agreements entered into under section 51A of the Act, we expect a water or sewerage company inspecting an SLOs work to be the exception rather than the norm.
Section 51A of the Water Industry Act 1991 – Agreements to adopt water mains or service pipes at a future date
Section 51B of the Water Industry Act 1991 – Appeals with respect to adoption
Relevant Ofwat guidance
Assurance terms in self-lay agreements entered into under section 51A of the Act
Independent review of overhead costs and administration fees
22 April 2015
15 May 2017
If you have a query, please contact: [email protected]
Media enquiries to 0121 644 7642 / 7821 / 7616 or [email protected]