Case reference number
Summary of case
On 20 October 2009, we received a complaint from Utility Law Solutions (who represent nine separate developers) about the costs that Anglian Water charged those developers towards the provision of one of its strategic assets, the Wing Main, which is in the East of England.
By way of background, if a development requires a new water main or sewer, the developer may ask the water or sewerage company to install the pipework. When this is required for domestic purposes, it is known as requisitioning and the water or sewerage company can recover a requisition charge from the developer towards the costs of the works.
Alternatively, they may choose their own contractor to do the work, which is known as self-lay. The water company will take over responsibility for (adopt) self-laid pipes that meet the terms of its agreement with the developer or self-lay organisation (SLO) that carries out the work.
The costs that Anglian Water charged certain developers for the Wing Main were included as part of either a requisition charge or a self-lay charge as set out above.
Summary of Ofwat’s final determination
In our final determination we concluded that:
- it was appropriate for Anglian Water to include a proportion of the costs of the Wing Main in requisition and self-lay charges to developers; but
- the level of contributions collected by Anglian Water from developers was not appropriate.
We have determined that the developers’ contributions should be equal to the incremental costs of the additional capacity of the Wing Main required for new developments, beyond the capacity provided to ensure a security of supply for existing customers. We estimate this cost to be £2.5 million, which will be attributed to developers according to their share of the capacity provided. Our determination will result in developers receiving a refund, plus associated interest, on their contributions to date.
To reflect the change in the share of costs, we have also decided to add an extra £2.19 million (adjusted to reflect inflation) to Anglian Water’s regulatory capital value (RCV) – to be recovered from all of Anglian Water’s customers through their regulated prices.
We issued a draft determination to Anglian Water and Utility Law Solutions in December 2013 and a public consultation in February 2014 before making this final determination.
Wider lessons for companies and customers
We consider that our determination:
- will encourage water companies to make long term investment that identifies and responds to future housing growth in a timely manner, to the benefit of both current and future customers; and
- provides a fair decision for developers through more cost reflective charging, where the charges developer customers are paying better reflects the services they are receiving.
We are keen to see the efficient and timely planning of companies’ networks as this will benefit existing and new customers through shared costs and benefits. This determination supports such an approach so that companies can build strategic, joined up solutions where multiple development sites are coming forward, rather than progressing a succession of smaller schemes. The determination also enables the recovery of fair and proportionate contributions from new and existing customers to the infrastructure required to respond to growth.
We also want to see the sector stepping up and taking responsibility for ensuring that its relationships are open, honest, fair and transparent.
Our general expectations on how monopoly water and sewerage and water only companies in England and Water should provide and charge for new connections, are set out in IN 14/16 – Improving Services for customers on new connections published in September 2014. We also have a web page – new connections – which set out these issues in more detail including the importance of planning for and enabling growth in the housing market.
Sections 30A, 42(6) and 51C (11) of the Water Industry Act 1991
Relevant Ofwat guidance
Dispute referred under sections 30A, 42(6) and 51C(11) of the Water Industry Act 1991 on inclusion of costs associated with ‘the Wing Main’ in requisition charges for water supply infrastructure from Anglian Water Services Limited – Final determination
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