Summary of case
This dispute relates to the charges required to be paid and the defect liability retention payment required to be provided to Dŵr Cymru under a self-lay agreement for works provided by a self-lay organisation (SLO) on a housing development site. The SLO referred the dispute to us because it believed that the charges and retention payment requirement were too high and not recoverable under section 51C of the Water Industry Act 1991 (the Act).
Summary of our final decision
In this case we only had jurisdiction to determine those disputed costs that were recoverable under section 51C of the Act. We did not have jurisdiction to consider the other costs disputed by the SLO because they formed part of the terms of the self-lay agreement that had been agreed and signed by the parties prior to the disputed terms being referred to us for appeal.
Of the disputed costs, we determined that Dŵr Cymru is entitled to recover costs of £2,659.81 under section 51C of the Act. These costs were reasonably incurred by Dŵr Cymru in incorporating the self-laid main into the existing network by means of a branch connection. The remaining disputed costs were not recoverable under section 51C and had been recovered under the terms of the self-lay agreement. We were therefore unable to consider these costs.
We determined which of the disputed costs should be included in the calculation of the asset value for the self-laid mains. We concluded that the defects liability retention payment required by Dŵr Cymru should not form part of the calculation of the asset value.
Wider lessons for companies and customers
- Our ability to consider appeals under section 51B of the Act depends heavily on the dispute being referred to us ahead of a self-lay agreement being agreed and signed by the parties.
- Section 51(3) of the Act sets out the costs a water company is entitled to charge an SLO for works it does to incorporate a self-laid water main into its existing network.
- Under section 51C(3) a water company is not entitled to recover costs it incurs in relation to the self-laid main itself. However the parties may agree to the recovery of these costs under the terms of a self-lay agreement entered into under section 51A of the Act.
- Defect liability retention payments should not form part of the calculation of the asset value for self-laid works.
Section 51C of the Water Industry Act 1991
Relevant Ofwat guidance
28 October 2010
23 December 2015
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