Summary of case
This dispute was about the financial contribution that Bristol Water sought from Redrow Homes towards a water mains requisition. It was referred to us for determination under sections 42 and 30A of the Water Industry Act 1991 (the Act).
The complainant, Redrow Homes, disputed the amounts Bristol Water had charged and was seeking to recover for providing new water mains to serve its housing development site.
Redrow Homes referred the dispute to us because it believed the charges were too high and not calculated in accordance with the relevant sections of the Act. It believed the charges included the costs of additional capacity in mains that were not required to supply water to its site and did not appropriately reflect the charges expected to be payable to Bristol Water from the premises to be served by the requisitioned mains.
Summary of Ofwat’s final decision
- Bristol Water has appropriately apportioned the costs of the requisitioned mains between existing customers and developers to determine the charges payable for the provision of those mains.
- For the purposes of calculating the requisition charges the cost of each individual main that was provided, to directly serve premises on different phases of the site, should be combined with an appropriate proportion of the costs of the other mains that were necessary to provide a supply of water to the site. The requisition charges should also reflect the charges expected to be payable to Bristol Water from the premises served by the relevant requisitioned mains.
- As the total of the security deposits paid were greater than the final requisition charges that we have determined, Bristol should refund the difference to Redrow. This amounts to £635,007.
Wider lessons for companies and customers
- Companies and developers should communicate clearly and transparently with each other when discussing the requisitioning of new mains – particularly where there is uncertainty over the scale and timing of developments and multiple elements of infrastructure are required – to ensure the relevant sections of the Act are appropriately applied and understood.
- When calculating a requisition charge, water companies should include the costs of requisitioned main plus any costs associated with providing specific off-site or strategic reinforcement works (i.e. works that are necessary in consequence of a requisitioned main), where the costs of those works were reasonably incurred and the infrastructure was collectively required to serve domestic premises.
- The income offset provided for in the calculation of a requisition charge can be applied against the cost of off-site works where those works were required together with works on-site to serve domestic premises as part of the total costs reasonably incurred.
- Including contributions to off-site reinforcement works when calculating a requisition charge, does not prevent water companies from also requiring the payment of infrastructure charges for premises connected to the network for the first time.
Section 42 of the Water Industry Act 1991
Relevant Ofwat guidance
Our general expectations of monopoly companies when providing and charging for new connections
An overview of the charges we regulate
Better connected: a practical guide to utilities for home builders
9 March 2017
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