Ofwat issues separate rules for how companies should set and present their charges. Our power to do so is set out in the following sections of the Act:
- Wholesale Charging Rules are issued under sections 66E and 117I and apply to the wholesale services that companies provide to water supply and/or sewerage licensees;
- English New Connection Rules are issued under sections 51CD, 105ZF and 144ZA and apply to the provision of new connections and related services; and
- Charges Scheme Rules are issued under sections 143(6A) and 143B, and apply mainly to household services. However, infrastructure charges, which companies apply in relation to new connection services, are also issued as part of the Charges Scheme Rules, because of the way the Act confers powers on companies to charge for their functions.
During 2021 we updated our charging rules. We consulted on a set of proposals in June and followed up in August with a statutory consultation on draft rules. We issued revised rules in October, which will come into effect on 1 April 2022.
Full details of the changes we proposed are set out in the consultation documents, and the new rules show every change from the current rules in red or strikethrough text. The final rules are materially unchanged from the August consultation versions, but we have incorporated some minor amendments to the common terms and worked examples document and made other trivial clarifications and corrections.
In summary, the main changes to our rules are:
- A simplification of the publishing deadlines for charging documents;
- To allow water companies greater flexibility to publish their charges scheme at the same time as their associated statement of significant changes;
- A new requirement for water companies to set out how they will treat quotations for developer services that would cross into a new charging year;
- A new requirement on English water companies to use standardised terms in their charging arrangements for developer services;
- Moving the rules relating to English companies’ Infrastructure Charges and Income Offsetting so that they appear in the same document as the English New Connection Rules rather than in the Charges Scheme Rules document; and
- A new document entitled “Common Terms and Worked Examples – English New Connection Rules”, published by Ofwat. This document sets out definitions of common terms, agreed between water companies and stakeholders, for companies to use in their charging arrangements. It also sets out six scenarios of typical developments for English companies to prepare worked examples, to aid transparency and consistency in charging.
We are grateful to every respondent to our consultations, and to water companies, Water UK and other stakeholders for their efforts in agreeing the common terms and worked examples. We have carefully considered all responses when deciding which changes to propose. Some suggested changes were out of scope of this project or provided too late for us to incorporate in this process, but we will consider them for future updates to our rules.
The final rules are set out below.
Wholesale charging rules – Effective from April 2022.
Charging Rules for New Connection Services (English Undertakers) – Effective from April 2022.
Charges Scheme Rules – Effective from April 2022.
Common Terms and Worked Examples – English New Connection Rules – Effective from April 2022.