We regulate and oversee a number of different charges that companies set. These cover a range of policy areas, including:
- charges schemes
- wholesale charges
- bulk supply charges
- new connection charges
- access pricing
A charges scheme is a statement of each company’s charges and associated terms, such as times and methods of payment. It has to cover all charges that have not been levied in accordance with agreements with the persons to be charged, or under specific statutory powers.
- For 2017-18 charges schemes, companies must follow the charging scheme rules we have set out.
- Our approach for previous years is available on our Bills and charging schemes section of the website.
Wholesale charges are charges from wholesalers to retailers.
Effective 1 September 2016 (following amendments to the Water Industry Act 1991) we have a duty to set the rules that wholesalers must use when setting their charges for wholesale services.
From 1 April 2017, companies must follow the new wholesale charging rules we have set out.
Bulk supply charges
Bulk supplies are a supply of water from one appointed company to another. There are two types:
- between an incumbent water company and another incumbent water company; or
- between an incumbent water company and a company with ‘New Appointments and Variations’ (NAV).
Incumbent to incumbent bulk supplies are also known as trades. There are no charging rules for these agreements. However, to encourage water trading in our PR19 methodology we decided to maintain the water trading incentives from PR14, both export and import, for new water trades agreed in 2020-25. To qualify for the incentive, the water company would have to show that its trade complies with an Ofwat approved trading and procurement code.
Currently there are no charging rules for incumbent to NAV bulk supplies. However, if water companies fail to agree on the terms of their bulk agreement, including the charges, they can ask us to make a decision (a ‘determination’) about what the terms and conditions should be. Ofwat’s existing guidance can be found here:
- Bulk charges for new appointees – guidance on our approach and expectations (January 2021)
- ‘Negotiating bulk supplies – a framework’ (August 2013)
- Our website has further guidance for NAVs regarding the negotiation of bulk supplies.
Following a report from consultants CEPA, we consulted on bulk charges for New Appointees and issued an updated version of our final guidance complementing our existing guidance on bulk supply:
- Consultation on bulk charges for New Appointees and Variations (NAVs) (July 2020)
- Bulk Charges for new appointees – our conclusions (November 2020)
- Stakeholder responses to July 2020 consultation (November 2020)
- Bulk charges for new appointees – a consultation on revising our guidance (November 2020)
- Bulk charges for new appointees – conclusions on revising our guidance (January 2021)
New connection charges
The Water Industry Act 1991 (as amended by the Water Act 2014) allows us to set rules about the charges that developers and other customers pay water and sewerage companies for new connections and other infrastructure services.
From 1 April 2018, a new set of rules covering the charging for new connections and requisitions for companies wholly or mainly in England come into force. These new rules include requirements for water and sewerage companies to provide upfront charges for most connections services and make the charges for offsite reinforcement works more transparent and cost reflective.
Additionally, we are in the process of working with the Welsh Government and the Welsh water sector to develop a set of new connections rules to apply to companies that are wholly or mainly in Wales.
Wholesalers provide a range of other services, some of which require individual pricing approaches.
We issued a discussion paper on access pricing: Future access pricing in the water sector – a discussion paper