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New rules for new connections

Discussions have been taking place within a Defra-convened task and finish group about a draft set of charging rules that Ofwat has prepared. The overall approach of the draft rules is to set out principles which companies’ charges for new connections must meet, leaving the design of charges in the hands of companies. This mirrors the approach taken to charging schemes generally. Developers have however been very critical of companies’ charges and it remains to be seen whether this approach will be acceptable to them given the discretion it confers on companies and given also the prospect that it will lead to different approaches being adopted by different companies.

The draft also raises the idea of asset payments being made to developers where sewerage assets are adopted by water companies, thus creating equality with the position on water supply assets. This would however be a significant change to the current arrangements and it is unclear who would meet these additional costs. Water companies would be reluctant to increase bills to customers to meet such payments to developers.

The current informal consultation on these rules will be followed by a formal consultation but it is not envisaged that the final rules will be capable of being issued before the summer. The intention is for the new rules to take effect as from April 2017. It will be a major challenge for companies to draft new rules, consult on them with customers and other stakeholders and then make necessary system changes to implement the new regime in time for new rules to take effect next April.