rpt_tar2002-03

Tariff structure and charges

2002-2003 report

Tariff structure and charges

2002-03 report

May 2002

Contents

List of tables 2

List of annexes 4

Foreword 6

Summary 7

1. Price limits and bills 9

2. Approving companies’ charges schemes 2002-03 17

3. Unmeasured and measured charges 26

4. Metering and tariffs 45

5. Charges for sewerage services 50

6. Large user tariffs 62

7. Other charges 76

Annexes 79

Tariff structure and charges 2002-03 report

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List of tables

1 Comparison of price limits (K factors) in 2001-02 and 2002-03

2 Company performance on balancing water and sewerage charges in 2002-03

3 Average household bills for water 2002-03

4 Average household bills for sewerage 2002-03

5 Vulnerable group tariff 2002-03

6 Unmeasured water tariffs 2002-03 – household customers

7 Unmeasured sewerage tariffs 2002-03 – household customers

8 Unmeasured water bills in 2001-02 and 2002-03 – household customers

9 Unmeasured sewerage bills in 2001-02 and 2002-03 – household customers

10 Comparison of the measured/unmeasured tariff differential for water for 2001-02and 2002-03 – all companies

11 Comparison of the measured/unmeasured tariff differential for water for 2001-02and 2002-03 – water and sewerage companies

12 Comparison of household metered standing charges for 2001-02 and 2002-03 –water

13 Comparison of household metered standing charges for 2001-02 and 2002-03 –water and sewerage companies

14 Metered water tariffs 2002-03 – household customers

15 Metered sewerage tariffs 2002-03 – household customers

16 Sample metered water bills in 2001-02 and 2002-03 – household customers

17 Sample metered sewerage bills in 2001-02 and 2002-03 – household customers


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18 Proportion of water customers taking metered supplies in 2001-02 and 2002-03

19 Proportion of sewerage customers taking metered supplies in 2001-02 and 2002-03

20 Surface water drainage rebates 2002-03 – household customers

21 Trade effluent tariffs 2002-03

22 Sample trade effluent bills in 2001-02 and 2002-03 – 5,000 m3 of low strengtheffluent

23 Sample trade effluent bills in 2001-02 and 2002-03 – 5,000 m3 of high strengtheffluent

24 Comparison of measured household sewerage and trade effluent tariffs 2001-02and 2002-03

25 Tankered domestic waste charges 2002-03

26 Long run marginal cost estimates – steady demand

27 Long run marginal cost estimates – peak demand

28a Large user tariffs for water 2002-03 – water and sewerage companies

28b Large user tariffs for water 2002-03 – water only companies

28c Large user tariffs for sewerage 2002-03

29 Non-household reservation charges for water 2002-03

30 Comparison of non-potable volumetric charges with standard and large userpotable volumetric charges 2002-03

31 Hosepipe, sprinkler and swimming pool charges 2002-03


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Annexes

A1. Price limits 2000-01 to 2004-05

A2. Indicative changes in water and sewerage charges 2000-01 to 2004-05

A3. Example of tariff basket

B1. Water customers 2002-03

B2. Sewerage customers 2002-03

B3. Population receiving water services 2002-03

B4 Population receiving sewerage services 2002-03

B5. Area served 2002-03

C1. Water rateable value charges 1995-96 to 2002-03 – household customers takingunmeasured supplies

C2. Sewerage rateable value charges 1995-96 to 2002-03 – household customerstaking unmeasured supplies

C3. Water fixed charges 1995-96 to 2002-03 – household customers takingunmeasured supplies

C4. Sewerage fixed charges 1995-96 to 2002-03 – household customers takingunmeasured supplies

D1. Metered water tariffs 2002-03 – non-household customers

D2. Metered sewerage tariffs 2002-03 – non-household customers

D3. Sample metered water bills in 2001-02 and 2002-03 – non-household customers

D4. Sample metered sewerage bills in 2001-02 and 2002-03 – non-householdcustomers


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D5. Water volumetric rates 1995-96 to 2002-03 – household customers taking meteredsupplies

D6. Sewerage volumetric rates 1995-96 to 2002-03 – household customers takingmetered supplies

D7. Water standing charges 1995-96 to 2002-03 – household customers taking metered supplies

D8. Sewerage standing charges 1995-96 to 2002-03 – household customers takingmetered supplies


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Foreword

This report summarises companies’ regulated charges for 2002-03. It describes Ofwat’sapproach to assessing and approving companies’ charges schemes, and sets out ourpolicy on tariff issues.

The Government announced on 19 March 2002 that large-scale water users in Englandand Wales are to benefit from greater competition. I welcome these proposals. The threatof competition is already offering some benefits to these customers as the watercompanies develop their non-household tariffs. In this year’s report, we have providedmore detail on developments with large user tariffs.

For 2002-03, three more companies have introduced tariffs for intermediate users –customers using less than 50 megalitres a year. They join six other companies thatalready have such tariffs. These tariffs offer a small reduction compared with household tariffs to reflect the lower costs of supplying intermediate users. They areconsistent with the conclusions we reached after consulting the industry and otherinterested parties in autumn 2001 about the basis for intermediate user tariffs.

Some companies have been looking at ways of making their household tariffs more cost-reflective. For 2002-03, two companies have introduced a reduction for customers who pay their bills by direct debit, following the lead set by United Utilities Water lastyear. We agree that it is less costly for the companies to deal with this method ofpayment, and that this may justify a small reduction.

One of the main principles that governs our approach to approving companies’ chargesschemes is that customers’ bills should broadly reflect the cost of the services theyreceive. But some customers may need special protection. In line with the Water Industry (Charges) (Vulnerable Groups) Regulations 1999, since 2000-01 all companieshave offered tariffs for vulnerable measured customers. The Government has decided to review the Regulations, which apply to companies operating wholly or mainly inEngland, during 2002. This work could have implications for the future degree of socialprotection provided through companies’ water and sewerage charges.

Philip FletcherDirector General of Water Services


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Summary

Price limits and bills

• Ofwat set price limits in November 1999 for the five years 2000-05. This is the thirdyear of these price limits. The average increase in price limits for 2002-03 is 1.2%(including inflation).

• The increase in the average household water and sewerage bill has been kept below inflation this year. The increase in the average household bill is 0.6%.

Charges for households

• All companies have kept the tariff differential between measured and unmeasuredcharges within Ofwat’s limit of £32 for the combined water and sewerage bill.

• All ten sewerage companies have a fair balance between charges for trade effluentcustomers and household sewerage charges.

• All sewerage companies now offer surface water drainage rebates for households andnon-households not connected for surface water drainage. Companies have improvedtheir publicity for these rebates.

• Two companies – Northumbrian Water and Cambridge Water - have followed UnitedUtilities Water in offering a discount to customers who pay by direct debit. Due tooperational constraints, Cambridge Water will only offer the discount to measuredcustomers in 2002-03. This will be extended to unmeasured customers in 2003-04.

Charges for large users

• United Utilities Water has introduced a pilot scheme for a trade effluent reservationcharge. The first part of this charge is calculated on consented volume and strength,and the second part is calculated on actual discharge volume and strength.

• Anglian Water has added a maximum daily demand component to its large user tariffand reduced the volumetric rate.


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• Bournemouth and West Hampshire Water has introduced a reserved capacity charge for customers requiring standby supplies.

• Three companies have introduced tariffs for intermediate users. They are South EastWater, Wessex Water and Three Valleys Water. Bournemouth and West HampshireWater has introduced a lower threshold to its existing intermediate user tariff.

Optional metering

• Companies have continued to implement the new rights for household customersunder the Water Industry Act 1999. In 2001-02 the Director received six applicationsto make formal determinations concerning the right to a meter free of installationcharge – of these, five are ongoing and one was withdrawn.


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1. Price limits and bills

Ofwat regulates water and sewerage charges by setting a limit on the average increasein charges that a company can impose in any year. We set this limit, also known as the K factor, for the 23 water (and sewerage) companies in England and Wales. K is theamount by which a company can increase (or must decrease) its average charge above(or below) inflation each year to finance its services and meet its legal obligations.When inflation is included, this is commonly referred to as the “price limit”.

K is applied to the basket of regulated charges - the tariff basket (see page 11). Thiscovers both measured and unmeasured water and sewerage services as well as tradeeffluent charges. Within the price limit companies can increase or decrease averagecharges for individual basket items by different amounts. A company can, for example,increase charges for unmeasured sewerage services by a greater percentage thancharges for measured sewerage services.

A company has the option to increase its overall average charge by less (or decreasethem by more) than its K. If the company decides not to take the full available increasefor any particular year it can carry forward this unused K to future years. There was nomaterial unused K carried forward by companies from 2001-02 to 2002-03.

Ofwat set K factors for each company for the years 2000-01 to 2004-05 at the 1999 periodic review (PR99). We explained our decisions on the current price limits inour report, ‘Final determinations: Future water and sewerage charges 2000-05’.Companies were given the opportunity to ask for their K factors to be re-examined by the Competition Commission under the terms of their licences. Two small water onlycompanies, Mid Kent Water and Sutton and East Surrey Water used this referralmechanism. After considering evidence from Ofwat, the two companies, and otherinterested parties, the Competition Commission announced new K factors for the twocompanies in August 2000. The revised Ks took effect from April 2001.

Interim determination of K factors

Under certain conditions a company (or Ofwat) can request an interim determination of K (IDoK) where a “relevant item” causes significant changes in costs or revenues.Condition B of each company’s licence defines a relevant item as a relevant change ofcircumstance or a notified item.


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A relevant change of circumstance can occur where there is:

• a new or changed ‘legal requirement’ (as defined in the licence);• a difference in the proceeds from land disposals compared with what we assumed

when we last set price limits;• a failure by the company to deliver an output for which price limits allowed when they

were last set; or• a change in the construction price index compared with what we assumed when we

last set prices (applies only to some companies).

Notified items are anything which, when prices are set, Ofwat has recorded specificallyas having not been allowed for (either in part or at all). There are currently three.

• An increase in the number of customers opting for a free meter compared with theassumptions made when we last set price limits. For Mid Kent Water, Sutton and East Surrey Water, Dwr Cymru (Welsh Water) and Tendring Hundred Water, anadjustment can also be made if fewer customers take up the free meter option.These companies’ licences have been modified to allow this. South West Water and Dee Valley Water have also agreed to the licence modification. Their licences will bemodified shortly.

• The effects on debt collection of companies being prohibited from disconnectinghousehold supplies for non-payment of charges.

• The cost of administering the statutory scheme for abatement of metered charges todomestic customers in vulnerable groups.

In September 2000, Anglian Water, Dwr Cymru and Tendring Hundred Water applied toOfwat for an IDoK. We assessed the companies’ applications in December 2000.Revised Ks were set for Dwr Cymru and Tendring Hundred Water. These took effect from April 2001.

In September 2001, South West Water, Bournemouth and West Hampshire Water andDee Valley Water applied for an IDoK. South West Water and Dee Valley Water each saidthat the most significant change was the loss of revenue and increased costs associatedwith the number of customers switching to a meter. Bournemouth and West HampshireWater requested an IDoK to pay for a requirement for it to increase its monitoring ofwater quality. Revised Ks were set for all companies in December 2001, and took effectfrom April 2002.


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How price increases are controlled

Each company has a licence that provides the framework within which Ofwat carries outits duties in regulating the industry. Condition B of the licence sets out the RPI+K+Uformula for applying price limits.

RPI measures inflation and is the percentage increase in the Retail Price Index in theyear to the November before the charging year that begins on 1 April. K is the price limitOfwat sets for each company, for each year. U is any amount of K not taken up inprevious years.

Each company is required to produce an annual audited statement (the principalstatement) so that we can check that the overall weighted average increase of thecompany’s tariffs does not exceed the price limit.

The tariff basket

The tariff basket formula is a complex mechanism for weighting increases in individualtariffs. The current formula was established in the run-up to privatisation in 1989 by thethen Secretaries of State for the Environment and for Wales.

Details of the tariff basket and how it operates can be found in Annex A3. Put simply, the tariff basket comprises two methods of calculating the weighted average increase,one for the unmeasured charges and one for measured charges. Most of a company’scharges are linked within the tariff basket as a whole, which means that changes to onebasket of charges can be offset by changes to another. Similarly, changes to individualtariffs can be offset by changes to others. This is known as tariff rebalancing. Furtherdiscussion of these issues can be found in ‘Tariff rebalancing and the tariff basket: aconsultation paper’, published by Ofwat in November 1997.

Current price limits

The price limits for 2002-03 are shown in table 1. They reflect the revisions made byOfwat and by the Competition Commission to the K factors of Dwr Cymru, TendringHundred Water, Mid Kent Water, Sutton and East Surrey Water, South West Water,Bournemouth and West Hampshire Water and Dee Valley Water.


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Table 1 Comparison of price limits (K factors) in 2001-02 and 2002-03

2001-02 price limits 2002-03 price limitsPrice limit Price limit Price limit Price limit

plus inflation plus inflation% % % %

Water & sewerage companiesAnglian 1.0 4.2 2.2 3.1

Dwr Cymru1 0.2 3.4 0.7 1.6

Northumbrian2: -1.5 1.7 0.0 0.9

Essex & Suffolk – – – –

Northumbrian – – – –

Severn Trent -1.0 2.2 -1.0 -0.1

South West3 0.0 3.2 4.4 5.3

Southern 0.0 3.2 0.0 0.9

Thames 0.0 3.2 0.0 0.9

United Utilities -1.0 2.2 0.0 0.9

Wessex 0.0 3.2 0.0 0.9

Yorkshire 0.0 3.2 0.0 0.9

WaSC average (weighted) -0.3 2.9 0.3 1.2

Water only companiesBournemouth & W Hampshire3 -1.7 1.5 0.4 1.3

Bristol 1.0 4.2 1.0 1.9

Cambridge 0.0 3.2 -1.2 -0.3

Cholderton -5.0 -1.8 0.0 0.9

Dee Valley3 -2.6 0.6 -0.5 0.4

Folkestone & Dover 1.0 4.2 3.0 3.9

Mid Kent4 4.5 7.7 3.2 4.1

Portsmouth -1.2 2.0 -1.3 -0.4

South East -1.0 2.2 -1.5 -0.6

South Staffordshire -1.0 2.2 -1.0 -0.1

Sutton & East Surrey4 3.8 7.0 2.1 3.0

Tendring Hundred1 3.5 6.7 3.6 4.5

Three Valleys 0.0 3.2 0.0 0.9

WoC average (weighted) 0.2 3.4 0.1 1.0

Industry average (weighted) -0.3 2.9 0.3 1.2

Notes:Companies are permitted to increase charges, on average, by the price limit plus inflation.1 The price limits for Dwr Cymru and Tendring Hundred Water reflect Ofwat’s interim determination published in December 2000.2 Northumbrian Water and Essex & Suffolk Water have merged. A combined licence came into effect on 1 April 2000. This set out the

combined price limits for the merged company. The companies are required to comply with the separate price limits set in November1999 for the two areas in addition to the combined price limits set out in the licence amendment.

3 The price limits for South West Water, Bournemouth & West Hampshire Water and Dee Valley Water reflect Ofwat’s interimdetermination published in December 2001.

4 The price limits for Mid Kent Water and Sutton & East Surrey Water reflect the Competition Commission’s redetermination in August2000 of the price limits set by Ofwat in November 1999.

For 2002-03, the average price limit for all companies is 1.2%. Excluding inflation, theaverage price limit is 0.3%.


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The balance between water and sewerage charges

Ofwat has a duty to ensure that companies do not show undue preference or unduediscrimination in their charging policies. We interpret this to mean that, where possible,there should be no cross subsidy between different classes of customer. The chargesmade for water delivered and sewage taken away should recover fairly the costs ofproviding each service. This is particularly important for the significant number ofcustomers who receive their water and sewerage services from different suppliers. Allwater and sewerage companies have accepted the principle that customers receivingone service should not subsidise the costs of providing the other service.

Fairness between water and sewerage charges is achieved if the share of total revenuewhich companies gain from each service equals the share of total costs incurred inproviding each service. We consider that the best basis for achieving a fair balancebetween water and sewerage charges is for water and sewerage companies to equalisethe rates of return on capital employed in each service. The basis for this calculationshould be the regulatory capital values for each service.

For 2000-05, we set single K factors for water and sewerage companies rather thanseparate water and sewerage service K factors. However, we published an indicative splitof the K factors for the two services for each of the water and sewerage companies aspart of the final determinations of price limits in November 1999. These are consistentwith equalised rates of return on water and sewerage regulatory capital values. Theseparate indicative Ks are shown in Annex A2. The numbers have been updated wherenecessary to reflect changes in K factors set by Ofwat and the Competition Commission.

In the past, some companies have pointed out that actual expenditure on both water and sewerage services in any particular year may deviate from the forecasts made at the relevant periodic review. We think it is sensible for companies to follow the indicativesplit of Ks for the five-year period as a whole, rather than make year-on-year adjustmentsto these factors based on actual expenditure. We will account for deviations when we re-evaluate regulatory capital values at a subsequent periodic review and when we set theindicative split of K between water and sewerage.


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Companies’ performance in balancing charges

For some companies, for example, South West Water, to follow the indicative K factorsfor water and sewerage each year in the period 2000-05 would have led to prices for oneservice initially coming down significantly, only to rise again over the rest of the five-yearperiod. For these companies, we agreed a more even application of the price reductionfor water and sewerage charges in 2000-01, allowing for a smoother profile of prices forthe services concerned over the five-year period.

Table 2 provides details of each company’s performance in maintaining an appropriatebalance between water and sewerage charges. It shows that, with the exception of South West Water, the changes in companies’ average charges for water and sewerageservices are broadly in line with their indicative split of Ks for 2002-03. The reason for the different position of South West Water is explained above.

Table 2 Company performance on balancing water and sewerage charges in 2002-03 Actual Difference

Annual indicative real increase in (annual indicativeK factors for average charge K less actual

2002-031 2002-03 real increase)% %

Water and sewerage companiesAnglian Water 2.0 2.0 2 - 3

Sewerage 2.3 2.4 -0.1

Dwr Cymru Water -1.3 -1.3 0.0

Sewerage 2.5 2.6 -0.1

Northumbrian Water -0.6 -0.6 0.0

Sewerage 0.4 0.4 0.0

Severn Trent Water -1.2 -1.2 0.0

Sewerage -0.8 -0.8 0.0

South West Water 3.4 4.4 -1.0


Southern Water -2.4 -2.3 -0.1


Thames Water 0.5 0.5 0.0

Sewerage -0.4 -0.4 0.0

United Utilities Water 1.5 1.4 0.1

Sewerage -1.2 -1.1 -0.1

Wessex Water -0.1 0.0 -0.1


Yorkshire Water 0.2 0.2 0.0

Sewerage -0.2 -0.2 0.0

Notes:1 The indicative K factors for Dwr Cymru and South West Water have been revised following Ofwat’s interim determinations published

in December 2000 and December 2001 respectively.2 Excluding charge for water service for unmeasured unoccupied properties.3 Anglian Water and Ofwat disagree about the actual increase in Anglian Water’s average charge for water for 2002-03. The

disagreement arises from Ofwat’s and Anglian Water’s differing views about the indirect effect on the tariff basket of the company’swater service charge for unmeasured unoccupied properties. This issue is discussed in chapter 2.


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Table 3 Average household bills for water 2002-03

% change in average bills1 Average bill for 2

2001-02 - 2002-03 2001-02 2002-03(excluding (includinginflation) 3 inflation) 3 £ £

Water & sewerage companiesAnglian Water 1.2 2.0 111 113

Dwr Cymru -2.5 -1.6 126 124

Northumbrian:

Northumbrian -0.7 0.2 88 88

Essex & Suffolk -0.4 0.5 110 111

Severn Trent -1.2 -0.4 108 108

South West 2.1 3.0 112 115

Southern -2.5 -1.6 91 90

Thames -0.7 0.1 104 104

United Utilities 0.9 1.8 107 109

Wessex -0.1 0.8 112 113

Yorkshire:

Yorkshire -0.7 0.2 103 104

York -0.5 0.4 90 90

WaSC average (weighted) -0.3 0.4 106 107

Water only companiesBournemouth & W Hampshire 0.5 1.4 100 101

Bristol 0.5 1.4 104 106

Cambridge -2.3 -1.5 91 90

Cholderton 0.0 0.9 151 153

Dee Valley -1.5 -0.7 105 104

Folkestone & Dover 1.6 2.5 122 125

Mid Kent 2.7 3.6 122 127

Portsmouth -1.5 -0.6 75 75

South East -1.2 -0.4 122 121

South Staffordshire -0.6 0.3 86 86

Sutton & East Surrey -1.5 -0.6 122 121

Tendring Hundred 3.7 4.6 140 146

Three Valleys:

Three Valleys 0.4 1.3 111 112

North Surrey -5.9 -5.1 109 103

WoC average (weighted) -0.3 0.6 107 107

Industry average (weighted) -0.4 0.5 107 107

Notes:Average household bills include metered and unmetered customers.1 Percentage changes in average bills may not calculate due to rounding of the average household bills for 2001-02 and 2002-03.2 Level of bills for 2001-02 and 2002-03 are estimates based on provisional and forecast data provided by each company.3 Inflation, is measured here as the percentage charge in RPI (Retail Price Index). RPI increased by 0.87% between November 2000

and November 2001.


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Annex A2 shows that, for sewerage, some water and sewerage companies’ charges willrise quite sharply in the last two years of the quinquennium to enable them to meet theiradditional quality obligations. For water, with the significant exception of United UtilitiesWater, companies’ charges show only small or no increases for the rest of the period.

Average household bills

Details of average household bills for all companies for 2001-02 and 2002-03 are shownin tables 3 and 4. The tables also show the percentage changes in average householdbills for water and for sewerage services from 2001-02 to 2002-03.

We estimate the average household bill for 2002-03 in England and Wales for both waterand sewerage services to be £228 (£107 for water and £121 for sewerage).

The level of household bills for 2002-03 varies across England and Wales. For water,Tendring Hundred Water has the highest average bill at £146 and Portsmouth Water the lowest at £75. The level of average sewerage bills ranges from £93 for Thames Waterto £211 for South West Water. In addition to these geographic variations, the differencebetween the average bill and that for an individual customer will depend, for example, onwhether the customer has a measured or unmeasured supply.

Table 4 Average household bills for sewerage 2002-03

% change in average bills1 Average bill for 2

2001-02 - 2002-03 2001-02 2002-03(excluding (includinginflation) 3 inflation) 3 £ £

Water & sewerage companiesAnglian Water 1.7 2.6 153 157

Dwr Cymru 1.2 2.1 148 152

Northumbrian 0.1 1.0 112 113

Severn Trent -0.6 0.2 96 96

South West 1.8 2.7 206 211

Southern -0.4 0.4 151 152

Thames -1.3 -0.5 93 93

United Utilities -0.9 0.0 122 122

Wessex -1.1 -0.2 133 133

Yorkshire -0.9 -0.1 112 112

Industry average (weighted) -0.2 0.7 120 121

Notes:Average household bills include metered and unmetered customers.1 Percentage changes in average bills may not calculate due to rounding of the average household bills for 2001-02 and 2002-03.2 Level of bills for 2001-02 and 2002-03 are estimates based on provisional and forecast data provided by each company.3 Inflation, is measured here as the percentage charge in RPI (Retail Price Index). RPI increased by 0.87% between November 2000

and November 2001.


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2. Approving companies’ charges schemes 2002-03

The Water Industry Act 1999 (WIA 99) requires all companies to have a charges schemeapproved by the Director. It prohibits companies from charging household customersother than by an approved charges scheme.

Ofwat’s approach to approving charges schemes

Companies are responsible for deciding individual charges. Ofwat ensures that these are consistent with:

• licence Condition B, which requires that charges comply with price limits;

• licence Condition E, which requires that tariffs should not be unduly preferential orunduly discriminatory;

• guidance on charging matters from the Secretary of State and the National Assembly for Wales; and

• the Director’s duty to protect customers.

Within this general approach we have emphasised the following points when approvingcharges schemes for 2002-03.

• Charges for water and sewerage services should recover fairly the costs of providingeach service.

• Companies should maintain a fair balance between unmeasured and measuredcharges. Any difference, on average, between measured and unmeasured household bills should be no greater than the extra costs of providing a meteredservice. This difference is known as the measured/unmeasured tariff differential.Ofwat set a limit for the differential at £32 a year for water and sewerage services,split two-thirds water to one-third sewerage. All companies’ charges are within thisdifferential for 2002-03. Chapter 3 discusses this in more detail.

• Companies should maintain a fair balance between measured household seweragecharges and trade effluent charges. Differences in bills should only reflect differences in the volume and strength of the effluent. All companies are within therange set by Ofwat for 2002-03 charges (which required that household sewerageand trade effluent charges should be within 5p/m3 of one another). Chapter 5discusses this in more detail.


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• Customers should not see significant changes in their bills from year to year if theirwater use does not change markedly. For example, Anglian Water wishes to recoverhighway drainage costs from measured customers through the standing charge,rather than through the volumetric rate. In order to manage the impact on customers’bills, Anglian Water has agreed to phase in this change in its charges.

The WaterVoice Committees played an important role in advising Ofwat in the approvalprocess for 2002-03. In particular, they:

• participated in the summer tariffs meetings with the companies in July and August2001;

• provided comments on companies’ draft charges schemes during October 2001; and

• were given the opportunity to comment to Ofwat on any revised proposals fromcompanies following the submission of draft charges schemes.

Development of tariffs policy

In our forward programme for 2001-02 we said that we would review the following tariffpolicy issues:

• optional tariff for low users (with a zero standing charge);

• reduced charges for customers with private sewers;

• interruptible and time-of-day tariffs;

• cost allocation for trade effluent tariffs; and

• tariffs for intermediate business users (ie those consuming less than 50 Ml/year).


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We published our conclusions, some of which were provisional, in RD14/011. Weconsulted the industry and other interested parties on our approach to intermediate usertariffs2.

Our conclusions on each of these issues are set out below.

Low user tariffsLow user tariffs have limited social benefits because they are not based on customers’ability to pay. They also bring little environmental benefit. They have higher volumetricrates, which should discourage excessive water use. But low users have little discretionover how much water they use, so they are unlikely to reduce consumption in responseto a higher volumetric rate. Weighing these limited benefits against the impact on othercustomers, whose bills would have to rise, the Director concluded that he would notapprove charges schemes in which companies proposed to introduce low user tariffs.In the interests of keeping customers’ bills stable, we have not objected if companies with existing low user tariffs wish to retain them.

Reduced charges for customers with private sewersWe concluded that the size of the potential reduction in charges for customers withprivate sewers does not justify the cost of establishing a system of reduced charges.Consequently, we have not required companies to introduce reduced charges for these customers.

Interruptible and time-of-day tariffsCustomers reduce companies’ costs when they are prepared to accept the risk that their supply may be interrupted. We accept that it is appropriate for companies to offer a corresponding discount to such customers. Only four companies have introducedinterruptible tariffs and few customers have opted for them.

To date, no company has proposed a time-of-day tariff. In principle, such tariffs couldease peak demands on local distribution networks, reducing companies’ costs. Thebenefits would be modest, however, particularly when large users make little use of local distribution. We doubt whether these modest benefits would justify the higher costs of administering time-of-day tariffs, but we will consider any proposal on its merits.

1 RD14/01 ‘Approval of companies charges schemes 2002-03: tariff policy issues’ (September 2001).

2 RD15/01 ‘Intermediate user tariffs’ (September 2001).


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Allocation of trade effluent costsIn general, we accept the approaches that companies currently adopt for allocating costswhen setting the different elements of their trade effluent charges. But we asked a fewcompanies to clarify particular aspects of their approaches.

Intermediate user tariffsWe consulted on our proposed policy position on intermediate user tariffs for customersconsuming less than 50 Ml/year in RD15/01. We published our conclusions in RD16/023.

We consider that intermediate user tariffs can be justified on the basis that thesecustomers’ demands are less variable over the year. It is less costly to supply suchcustomers. However, tariffs justified in this way should be structured on a seasonal basis.We accept that intermediate user tariffs do not have to have a seasonal structure if theyare justified on the basis of other cost differences.

We consider that the reduction for intermediate users, compared with household tariffs,should generally be less than 10%. But we will continue to look at intermediate user tariff proposals on a case-by-case basis. We will not object to companies introducingintermediate user tariffs below 10 Ml/year if they can justify a material cost (and hencetariff) difference, although we would expect the difference for such a class to be small.

Tariff proposals modified or not approved for 2002-03

Anglian Water proposed increasing its tariffs generally by around 1.3% more than it has. It believes that the detailed rules in licence Condition B (governing compliance with its price limit) allow it to do so as an indirect consequence of introducing a waterservice charge (of £20) for unmeasured unoccupied properties.

We did not object to the new charge but we disagree with the company’s interpretation of licence Condition B. We did not, therefore, approve the additional increase in tariffs.The company has reserved its position for next year.

The purpose of licence Condition B is to ensure that companies set charges consistentwith price limits. We have, therefore, sought to operate Condition B to ensure thatrevenues are not adversely affected, for example when new tariffs are introduced. We are also alert, however, to attempts to use Condition B to secure, in effect, an increase in price limits.

3 RD16/02 ‘Intermediate user tariffs’ (May 2002).


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Companies have agreed to defer a number of other proposals for further considerationand possible implementation in 2003-04. Moreover, some of the proposals in companies’ draft charges schemes were modified before we approved the final schemes. These are set out below.

Household tariffsWe rejected Anglian Water’s proposal to extend its Aquacare tariff to unmeasuredcustomers. The unmeasured tariff already provides some social protection in thatcustomers do not need to limit their water use in order to save money. We also rejectedAnglian Water’s proposal to extend its Aquacare Plus tariff to customers not receivingbenefits. The Government explicitly limited the application of the Vulnerable GroupsRegulations to customers in receipt of selected benefits and tax credits. The Governmentwill be reviewing the Regulations during 2002. We considered that it would beinappropriate to pre-empt this review by approving extensions to either Aquacare orAquacare Plus.

Severn Trent Water considered a proposal to introduce a discount for customers payingby direct debit. It later decided not to do so, because it did not want to disturb the stabilityof customers’ bills.

Cambridge Water also proposed introducing a direct debit discount. However, due tooperational constraints, it withdrew the proposal to offer the discount to its unmeasuredcustomers. But it is offering a discount in 2002-03 for measured customers paying bydirect debit, and it plans to extend the discount to unmeasured customers in 2003-04.

Non-household tariffsThree Valleys Water proposed introducing a new tariff for intermediate customers (those using less than 50 Ml/year) on the basis of both lower customer-related costs andlower peak-demand related costs. The company withdrew the latter part of its proposalspending further work.

South East Water proposed to introduce an intermediate user tariff without a seasonalstructure. We agreed to this on an interim basis on condition that the tariff should only be offered to customers whose demands did not include a significant summer peak.

Anglian Water proposed to introduce its new industrial tariff with a very high maximumdaily demand component (accounting for around 80% of customers’ bills). We raisedconcerns about this, particularly because of the impact on bills when customers wouldhave little or no time to respond to the new tariff. Anglian Water revised its proposal byreducing the maximum daily demand component, which now accounts for around 16% of customers’ bills.


21

Severn Trent Water proposed to widen the gap between the May-September andOctober-April volumetric rates in its ECO 20 tariff. The company’s original proposal wouldhave widened the gap to an extent that would have had a significant impact on a verysmall number of customers. The company subsequently proposed a more modest gapbetween these volumetric rates, which we accepted.

Timing and methods of payments

We have made sure that charges schemes include companies’ arrangements for the timing and methods of payments of bills. In particular, we have ensured that companiesmeet minimum requirements for customers facing difficulties in budgeting for essentialhousehold bills. Ofwat expects companies to maintain acceptable payment arrangementsfor low income customers, including the provision of cash payments free of charge atreasonably accessible locations.

Competition Act 1998

The Competition Act 1998 (CA98) came into effect on 1 March 2000. It has strengthened Ofwat’s concurrent powers (with the Office of Fair Trading) to investigateand act against anti-competitive agreements and abuses of a dominant position. TheCA98 guideline, ‘The application in the water and sewerage sectors’, (February 2000),sets out how we will apply CA98 in the water and sewerage sectors.

The water companies are currently subject to detailed regulation by Ofwat under theirlicence conditions. But this does not preclude us from looking at potentially anti-competitive behaviour such as predatory or excessively high pricing, which may infringeCA98. We take CA98 considerations into account when reviewing companies’ draftcharges schemes. In the light of new information or a complaint made to us, however, we may reconsider our view about likely compliance with CA98.

Where a particular agreement or practice falls within the scope of the Water Industry Act1991 as well as the CA98, we can use whichever statutory power we judge to be mostappropriate to address the specific conduct.


22

Optional metering entitlement

In the first two years of the right to a free meter, six disputes between customers andcompanies were referred to the Director General. Of these, five are still on-going and onewas withdrawn.

If it is too expensive, or not practicable to install a meter, companies must offer anassessed charge. All companies do so. However, it is for individual companies to decide the actual basis for an assessed charge, which must then be applied consistentlyto all customers affected.

For 2002-03 we require all companies to meet a three-month timescale to install a freemeter following the customer’s request (a measured charges notice).

Compulsory metering of households

Regulations apply which set out the circumstances in which the compulsory metering of existing households is allowed (ie only in certain prescribed circumstances).The Regulations do not apply to any water or sewerage undertaker whose area is whollyor mainly in Wales. The National Assembly for Wales has yet to make similar regulationsfor companies operating mainly in Wales.

Following discussions with companies, we made it clear that the restrictions under theWIA 99 also apply to existing unmeasured households whose premises may haveundergone substantial alterations. In these cases, the company may either charge withreference to a notional rateable value (if provided for in the charges scheme) or may offeran assessed charge.

The Regulations also provide for the area of a company’s supply (or any zone within it) to be designated as a water scarce area. This would allow companies to metercustomers selectively. We have had discussions with some companies in Englandconsidering applying for designation as water scarce areas. But no company has yetmade an application to the Secretary of State. We will provide advice to the Secretary ofState if an application is made.


23

Tariffs for vulnerable groups

The Regulations provide that, for companies operating mainly in England, measuredcustomers who meet certain qualifying conditions may apply for a vulnerable group tariff. This caps their water bill at the average household charge for their area.

Table 5 sets out the levels of the vulnerable group tariff for each company for 2001-02and 2002-03. In line with the Regulations, Ofwat required the companies to set their tarifffor 2002-03, at or as close as possible to the average household bill for each service.The table also shows the voluntary provisions made by companies operating mainly inWales, where Regulations do not apply.

Approving companies’ charges schemes 2003-04

We have encouraged companies to share with us as early as possible any significantproposals for new or revised non-household tariffs. RD04/024 recommended a timetablefor companies to do this. It made clear that we will continue to consider proposalsoutside of the recommended timetable. Our objective is not to impose an additionalregulatory requirement. It is to make it easier for companies to give their businesscustomers early notice of tariff changes that are likely to have a significant impact onbills. We think this serves the interests of companies and their customers.

4 RD 04/02 ‘Non-household tariff proposals for 2003-04’ (March 2002).


24

Table 5 Vulnerable group tariff 2002-031

£/yearWater Sewerage

2001-02 2002-03 2001-02 2002-03Water & sewerage companiesAnglian: 150.00 157.00

Anglian 109.00 113.00 – –

Hartlepool 83.00 86.00 – –

Dwr Cymru2 123.32 124.02 146.75 151.55

Northumbrian: 110.00 110.00

Essex & Suffolk 110.00 110.00 – –

Northumbrian 85.00 85.00 – –

Severn Trent 105.00 105.00 95.00 95.00

South West 110.00 115.00 200.00 210.00

Southern 90.00 90.00 150.00 150.00

Thames 96.00 98.00 90.00 92.00

United Utilities 105.00 108.00 120.00 119.00

Wessex 108.00 113.00 133.00 133.00

Yorkshire: 112.00 112.00

Yorkshire 102.00 104.00 – –

York 89.00 90.00 – –

Water only companiesBournemouth & W Hampshire 96.40 97.00

Bristol 105.00 107.00

Cambridge 88.00 88.00

Cholderton 140.00 155.00

Dee Valley2 105.94 104.36

Folkestone & Dover 120.00 120.00

Mid Kent 120.00 126.00

Portsmouth 75.00 75.00

South East 117.00 122.00

South Staffordshire 86.00 86.00

Sutton & East Surrey 120.00 120.00

Tendring Hundred 144.00 146.00

Three Valleys 108.00 109.40

Notes:1 In line with the vulnerable group regulations, companies have been required to set the vulnerable group tariff in 2002-03 at or close

to the average household bill for each service.2 Regulations relating to vulnerable groups do not apply to any water or sewerage undertaker whose area is wholly or mainly in Wales

(Dwr Cymru and Dee Valley Water). These companies, have voluntarily chosen to introduce a scheme for vulnerable customers.


25

3. Unmeasured and measured charges

In most cases, companies charge for water and sewerage services in one of two ways:either on the basis of the rateable value (RV) of the property (unmeasured charges); orthe amount of water recorded by the customer’s meter (measured charges).

Unmeasured charges

In 2002-03, companies expect around 77% of household customers and around 12% of non-household customers in England and Wales to have unmeasured supplies (seechapter 4, table 18).

Following the change in the basis of local taxation, councils did not issue new RVs afterMarch 1990. The Water Industry Act 1991 allowed companies to use RVs as a basis ofcharging until 31 March 2000. However, the Water Industry Act 1999 removed thisdeadline and gave companies the right to continue to use RVs for unmeasured chargingpurposes. The Government has not, however, ruled out the introduction of otherunmeasured charging arrangements in the future.

Ofwat will consider companies’ proposals for any major changes to the structure ofunmeasured charges. Following the Secretary of State’s guidance to the Director,published in February 2000, they will then be referred to the Secretary of State.

Where properties do not have an RV (for example in homes built since March 1990) or where the RV is particularly outdated (for example where premises have beenextensively altered) companies may apply a notional RV charge based on criteria suchas the size and location of the property, or an assessed charge.

Structure of unmeasured charges

The unmeasured bill usually comprises a fixed charge, which includes the customer-related costs of supply (for example, billing), and an RV-related charge. However, twocompanies do not include a fixed charge in the bill, while two companies charge only afixed fee (licence fee). In all cases the amount customers pay is not related to levels ofwater consumption.

Tables 6 and 7 show the components of the unmeasured charge for water and forsewerage as well as the forecast average unmeasured household bill for 2002-03 foreach company. Tables 8 and 9 provide examples of annual water and sewerage bills forthree sample levels of RV (£100, £200 and £300).


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Table 6 Unmeasured water tariffs 2002-03 - household customers Fixed Rateable value Average

charge charge bill in 2002-03£/year p/£RV £

Water & sewerage companiesAnglian: 133

Anglian 69.12 36.78 Hartlepool1 87.56 –

Dwr Cymru 80.23 39.66 132Northumbrian:

Essex & Suffolk: 26.50 123Essex 39.46 Suffolk 69.38

Northumbrian 49.00 27.00 89Severn Trent2: – 113

Zone 1 64.27 Zone 2 57.87 Zone 3 56.11 Zone 4 58.63 Zone 5 67.40 Zone 6 70.12 Zone 7 70.60 Zone 8 56.11

South West 47.90 50.71 131Southern 21.70 35.00 91Thames: 16.00 106

Area 1 34.40 Area 2 35.01 Area 3 26.33 Area 4 31.52 Area 5 40.48 Area 6 35.11 Area 7 48.24

United Utilities 35.00 44.90 111Wessex 7.00 63.73 120Yorkshire:

Yorkshire 23.00 67.00 109York 21.00 45.70 92

Water only companiesBournemouth & W Hampshire 17.50 39.37 104Bristol 18.00 50.70 111Cambridge 16.00 35.72 99Cholderton 26.00 49.40 151Dee Valley: 117

Chester 26.74 39.73 Wrexham 67.80 42.41

Folkestone & Dover 30.16 64.64 136Mid Kent 40.00 48.80 133Portsmouth3 22.00 24.00 74South East: 12.00 126

Mid Southern 35.65 South East:

Eastbourne 61.64 Mid-Sussex 65.62 West Kent 57.49

South Staffordshire2 – 41.20 87Sutton & East Surrey: 124

Northern Area1 106.00 –Northern Area (Croydon) 32.00 25.85 Southern Area 32.00 44.21

Tendring Hundred 28.00 76.60 175Three Valleys:

North Surrey 22.50 33.20 109Three Valleys: 30.10 119

Colne Valley 29.68 Lee Valley 36.46 Rickmansworth 28.87

Notes:Bill = fixed charge + (rateable value charge x rateable value of property).1 A licence fee is levied in the Hartlepool area of Anglian Water and the Northern area (excluding the Croydon area) of Sutton & East

Surrey Water.2 Severn Trent Water and South Staffordshire Water do not make a fixed charge for unmeasured water customers.3 These charges apply from 1 July 2002.


27

Table 7 Unmeasured sewerage tariffs 2002-03 - household customers

Rateable AverageFixed value bill in

charge charge 2002-03£/year p/£RV £

Water & sewerage companiesAnglian 90.89 48.07 185

Dwr Cymru 102.98 46.07 163

Northumbrian 68.50 30.49 114

Severn Trent1: – 98

Zone 1 54.99

Zone 2 46.31

Zone 3 48.78

Zone 4 52.90

Zone 5 61.72

Zone 6 59.78

Zone 7 58.25

Zone 8 48.43

South West 46.70 126.73 253

Southern 38.50 61.30 158

Thames: 28.00 95

Area 1 25.12

Area 2 26.04

Area 3 16.35

Area 4 23.49

Area 5 30.80

Area 6 25.48

Area 7 35.80

United Utilities1 – 72.80 123

Wessex 7.00 72.95 140

Yorkshire 25.00 71.70 118

Notes:

Bill = fixed charge + (rateable value charge x rateable value of property).

1 Severn Trent Water and United Utilities Water do not make a fixed charge for unmeasured sewerage customers.


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29

Table 8 Unmeasured water bills in 2001-02 and 2002-03 - household customers Annual bill in £ for properties with rateable values of

£100 £200 £3002001-02 2002-03 2001-02 2002-03 2001-02 2002-03

Water & sewerage companiesAnglian:

Anglian 103.16 105.90 141.25 142.68 179.34 179.46Hartlepool 85.15 87.56 85.15 87.56 85.15 87.56

Dwr Cymru 120.52 119.89 160.39 159.55 200.26 199.21Northumbrian:

Essex & Suffolk:Essex 64.34 65.96 102.68 105.42 141.02 144.88Suffolk 93.41 95.88 160.82 165.26 228.23 234.64

Northumbrian 75.25 76.00 101.50 103.00 127.75 130.00Severn Trent:

Zone 1 64.38 64.27 128.76 128.54 193.14 192.81Zone 2 57.96 57.87 115.92 115.74 173.88 173.61Zone 3 56.21 56.11 112.42 112.22 168.63 168.33Zone 4 58.72 58.63 117.44 117.26 176.16 175.89Zone 5 67.51 67.40 135.02 134.80 202.53 202.20Zone 6 70.23 70.12 140.46 140.24 210.69 210.36Zone 7 70.73 70.60 141.46 141.20 212.19 211.80Zone 8 56.21 56.11 112.42 112.22 168.63 168.33

South West 93.46 98.61 141.52 149.32 189.58 200.03Southern 57.30 56.70 92.60 91.70 127.90 126.70Thames:

Area 1 49.69 50.40 83.38 84.80 117.07 119.20Area 2 50.28 51.01 84.56 86.02 118.84 121.03Area 3 41.78 42.33 67.56 68.66 93.34 94.99Area 4 46.87 47.52 77.74 79.04 108.61 110.56Area 5 55.64 56.48 95.28 96.96 134.92 137.44Area 6 50.38 51.11 84.76 86.22 119.14 121.33Area 7 63.24 64.24 110.48 112.48 157.72 160.72

United Utilities 77.80 79.90 121.60 124.80 165.40 169.70Wessex 69.51 70.73 132.02 134.46 194.53 198.19Yorkshire:

Yorkshire 88.90 90.00 154.80 157.00 220.70 224.00York 66.00 66.70 111.00 112.40 156.00 158.10

Water only companiesBournemouth & W Hampshire 55.54 56.87 94.08 96.24 132.62 135.61Bristol 67.85 68.70 117.70 119.40 167.55 170.10Cambridge 52.00 51.72 88.00 87.44 124.00 123.16Cholderton 74.90 75.40 123.70 124.80 172.50 174.20Dee Valley:

Chester 66.13 66.47 105.65 106.20 145.17 145.93Wrexham 109.66 110.21 151.86 152.62 194.06 195.03

Folkestone & Dover 88.93 94.80 149.66 159.44 210.39 224.08Mid Kent 84.77 88.80 131.54 137.60 178.31 186.40Portsmouth1 2 53.60 52.40 71.60 70.00 95.40 94.00South East:

Mid Southern 46.80 47.65 81.60 83.30 116.40 118.95South East:

Eastbourne 72.16 73.64 132.32 135.28 192.48 196.92Mid-Sussex 76.05 77.62 140.10 143.24 204.15 208.86West Kent 68.11 69.49 124.22 126.98 180.33 184.47

South Staffordshire 41.20 41.20 82.40 82.40 123.60 123.60Sutton & East Surrey:

Northern Area 106.00 106.00 106.00 106.00 106.00 106.00Northern Area (Croydon) 57.57 57.85 83.14 83.70 108.71 109.55Southern Area 75.70 76.21 119.40 120.42 163.10 164.63

Tendring Hundred 99.09 104.60 171.18 181.20 243.27 257.80Three Valleys:

North Surrey 54.45 55.70 86.90 88.90 119.35 122.10Three Valleys:

Colne Valley 58.42 59.78 87.44 89.46 116.46 119.14Lee Valley 65.05 66.56 100.70 103.02 136.35 139.48Rickmansworth 57.62 58.97 85.84 87.84 114.06 116.71

Notes:Bill = fixed charge + (rateable value charge x rateable value of property).1 These charges apply from 1 July.2 Portsmouth Water has a minimum charge for unmeasured customers.

Table 9 Unmeasured sewerage bills in 2001-02 and 2002-03 - household customers

Annual bill in £ for properties with rateable values of£100 £200 £300

2001-02 2002-03 2001-02 2002-03 2001-02 2002-03Water & sewerage companiesAnglian 131.16 138.96 180.76 187.03 230.36 235.10

Dwr Cymru 143.94 149.05 188.43 195.12 232.92 241.19

Northumbrian 97.45 98.99 126.90 129.48 156.35 159.97

Severn Trent:

Zone 1 54.86 54.99 109.72 109.98 164.58 164.97

Zone 2 46.21 46.31 92.42 92.62 138.63 138.93

Zone 3 48.67 48.78 97.34 97.56 146.01 146.34

Zone 4 52.78 52.90 105.56 105.80 158.34 158.70

Zone 5 61.58 61.72 123.16 123.44 184.74 185.16

Zone 6 59.65 59.78 119.30 119.56 178.95 179.34

Zone 7 58.13 58.25 116.26 116.50 174.39 174.75

Zone 8 48.32 48.43 96.64 96.86 144.96 145.29

South West 163.77 173.43 283.44 300.16 403.11 426.89

Southern 98.40 99.80 158.80 161.10 219.20 222.40

Thames:

Area 1 52.87 53.12 77.74 78.24 102.61 103.36

Area 2 53.78 54.04 79.56 80.08 105.34 106.12

Area 3 44.18 44.35 60.36 60.70 76.54 77.05

Area 4 51.25 51.49 74.50 74.98 97.75 98.47

Area 5 58.50 58.80 89.00 89.60 119.50 120.40

Area 6 53.23 53.48 78.46 78.96 103.69 104.44

Area 7 63.43 63.80 98.86 99.60 134.29 135.40

United Utilities 72.00 72.80 144.00 145.60 216.00 218.40

Wessex 79.09 79.95 151.18 152.90 223.27 225.85

Yorkshire 95.90 96.70 166.80 168.40 237.70 240.10

Notes:

Bill = fixed charge + (rateable value charge x rateable value of property).


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RV modifierUnmeasured charges have been criticised because water consumption does notnecessarily rise in proportion to increases in RV. Customers with lower RVs maytherefore pay too little for the amount of water consumed, while those with higher RVsmay pay too much.

To help adjust for this, some companies include an additional amount in the fixed chargewhich reduces the range in the level of customers’ bills between higher and lower RVproperties. This is called the ‘RV modifier’. Its effect is shown in figure 1.

Figure 1 The effect of the RV modifier

The figure illustrates that, without the inclusion of an RV modifier, there is a wider rangein bills between those customers with a high and low RV. When an RV modifier isintroduced, the overall revenue from unmeasured customers remains the same, but therange between the highest and lowest bills is reduced.

In recent years most companies have increased the size of the fixed element inunmeasured household bills. In doing so they have increased the relative size of the RV modifier. This has meant that unmeasured household bills for those companies now have a larger fixed element and a smaller RV-related element. Companies see this asunwinding part of the cross-subsidy that exists between low RV and high RV customers.

The differences in the level of the fixed charge between companies are due in part tocompanies’ individual charging policies. Also, historically each water company has haddifferent methods of apportioning unmeasured charges between the fixed and variableelements. We accept that any significant changes could have adverse incidence effectson some customers.


31

No RV modifier

With RV modifier

Bills (£)

RVmodifier

Customerrelated costs

[[

Rateable value (£)

Rebalancing between measured and unmeasured customersTo avoid undue preference or undue discrimination between customer groups, in recentyears companies have had to adjust the balance of tariffs between measured andunmeasured customers to take account of the impact of customers switching to a meter.This is known as rebalancing.

The WIA 99 now gives all household customers the right to a meter free of installationcharge. Some customers would gain more than others would from having a meter. Forexample, households with low consumption but a high RV would be more likely to gainfrom switching to a meter than would households with high consumption but a low RV.The extent to which this is so depends on the company’s unmeasured tariff structure (in particular the size of the RV modifier).

Companies can lose revenue in three ways as a result of tariff switching. The loss mightbe because the household that switches:• has a higher than average RV;• used less water pre-metering than the average unmeasured user; or• uses less water because it is metered.

The tariff basket allows companies to reset unmeasured tariffs to maintain revenue when households with a higher than average RV switch to a meter. That is, unmeasuredcharges can rise to maintain a constant average charge. Where a household thatswitches uses less water than the unmeasured average, companies cannot directlyrecover this lost revenue. The 1999 price limits allowed for this by setting price limitsconsistent with the projected rate of switching for each company.Ofwat has accepted that there may be situations where the number of householdershaving meters installed might exceed that allowed for in companies’ price limits.Following the setting of price limits in November 1999, we modified companies’ licencesto allow for this. MD1575 explains the licence modification further.

Measured/unmeasured tariff differentialWe expect any difference, on average, between measured and unmeasured householdbills to be no greater than the extra costs of providing a metered service. This differenceis known as the measured/unmeasured tariff differential.

5 MD157 ‘Licence modification – Condition B’ (January 2000).


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The tariff differential is calculated by applying the company’s measured householdcharges to the forecast average amount of water delivered by that company to anunmeasured household. We then compare the resulting measured household bill with theforecast average unmeasured household bill for that company. By resetting the level ofthe differential within Ofwat’s limits, companies are able to change the balance betweencharges for measured and unmeasured household customers.

The level of the tariff differential is sensitive to a company’s forecast of the averageamount of water delivered to (or sewage collected from) an unmeasured household.This average figure may increase as a result of underlying growth in unmeasuredconsumption or as a result of unmeasured households with lower than averageconsumption switching to a measured basis of charging. In either case, the remainingunmeasured household customers, on average, will be making greater use of water andsewerage services. The tariff differential ensures that, on the whole, these customers paycharges that reflect this greater use and so maintains fairness in charging in relation tomeasured household customers.

Ofwat reviewed the structure, level and calculation of the tariff differential in summer2000. This review covered the assessment of the costs associated with providing ameasured supply, and whether the methodology used to calculate the differential wasappropriate.

We published our conclusions in MD1656. These were that the additional costs ofproviding a measured service should total no more than £32 a year for water andsewerage services. These additional costs include the customer-related costs ofmetering (such as meter reading, billing and account management) and the value ofbenefits received by metered customers but not by unmeasured customers (such as thecash-flow effect of paying bills in arrears and rebates on supply pipe leakage). Wereviewed these cost estimates for 2002-03 but did not change the maximum level.

We consider the appropriate split of the costs between water and sewerage services tobe two-thirds water to one-third sewerage. The tariff differential for water should,therefore, be no more than £21 a year, and for sewerage no more than £11 a year, in2002-03 prices. This split is particularly important where separate companies provide the sewerage and water services to a customer.

Tables 10 and 11 show the levels of the measured/unmeasured household tariffdifferential for all companies in 2001-02 and 2002-03. All companies’ differentials arewithin the Ofwat limit for 2002-03.

6 MD165 ‘Approval of Companies’ charges scheme in 2001-2002 (September 2000).


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Table 10 Comparison of the measured/unmeasured tariff differential for water for 2001-02

and 2002-03 - all companies

£/year ChangeWater and sewerage companies 2001-02 2002-03 £Anglian 13 20 7

Dwr Cymru 21 21 0

Northumbrian:

Northumbrian 14 13 -1

Essex & Suffolk 20 16 -4

Severn Trent 21 20 -1

South West 21 20 -1

Southern 21 20 -1

Thames 21 17 -4

United Utilities 18 21 3

Wessex 20 21 1

Yorkshire:

Yorkshire 18 20 2

York 2 6 4

WaSC average (weighted) 19 19 0

Water only companies

Bournemouth & W Hampshire 21 21 0

Bristol 14 16 2

Cambridge 15 19 4

Cholderton 3 16 13

Dee Valley 2 2 0

Folkestone & Dover 20 21 1

Mid Kent 19 21 2

Portsmouth 18 19 1

South East 24 21 -3

South Staffordshire 21 20 -1

Sutton & East Surrey 20 20 0

Tendring Hundred 9 21 12

Three Valleys:

Three Valleys 7 7 0

North Surrey 0 10 10

WoC average (weighted) 15 16 1

Industry average (weighted) 18 18 0

Notes:All figures are rounded to the nearest £.Figures are based on company forecasts of average unmeasured household consumption.


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Table 11 Comparison of the measured/unmeasured tariff differential for 2001-02 and

2002-03 - water and sewerage companies

£/year ChangeSewerage 2001-02 2002-03 £Anglian 6 9 3

Dwr Cymru 11 11 0



South West 11 10 -1

Southern 11 11 0

Thames 10 11 1


Wessex 5 11 6

Yorkshire 8 11 3


Water and sewerage

Anglian 19 29 10

Dwr Cymru 32 32 0



South West 32 30 -2

Southern 32 31 -1

Thames 31 28 -3


Wessex 25 32 7

Yorkshire 26 31 5


Notes:

All figures are rounded to the nearest £.

Figures are based on company forecasts of average unmeasured household consumption and household supply pipe leakage.


35

Structure of measured chargesThe measured bill has two elements - a standing charge which is fixed irrespective ofconsumption and is the same for all customers on the tariff, and a volumetric chargewhich varies depending on how much water is used. We consider that companies muststrike a proper balance in measured charging between those charges that reflectcustomer-related costs and those related to the demand for water.

To give customers sensible incentives to use water efficiently, the volumetric chargeshould be set to recover the costs which companies would incur over the longer term to meet demand. The standing charge, on the other hand, should recover no more thanthe customer-related costs for the unmeasured service, plus the additional fixed costsassociated with providing a measured service (for example, meter reading).

High standing charges lessen the incentives for customers to control their consumption.They are also difficult to reconcile with the duty placed on all companies by the 1995Environment Act, which requires companies to promote the efficient use of water by their customers.

As part of our review of the measured/unmeasured tariff differential we considered theappropriate level of the measured household standing charge. We concluded that themaximum level should be £30 - split £20 for water and £10 for sewerage, which consistsof the fixed customer-related costs associated with providing a measured account. Tables12 and 13 show how household standing charges have changed since 2001-02. With theexception of Portsmouth Water, all companies now have a water standing charge of £20or less.

Anglian Water is the only company to increase its measured water standing chargesignificantly for 2002-03 (from £16 to £20).


36

Table 12 Comparison of household metered standing charges for 2001-02 and 2002-03 -

water

£/year Change2001-02 2002-03 £ %


Anglian 16.00 20.00 4 25

Hartlepool 20.00 20.00 0 0

Dwr Cymru 20.00 20.00 0 0


Severn Trent 16.56 16.68 0 1

South West 16.32 16.56 0 1

Southern 19.00 19.00 0 0

Thames 16.00 16.00 0 0


Wessex 17.00 17.00 0 0

Yorkshire 19.00 19.00 0 0


Bournemouth & W Hampshire 17.00 17.50 1 3

Bristol 19.00 19.50 1 3

Cambridge 19.00 20.00 1 5

Cholderton 17.60 18.00 0 2

Dee Valley 17.00 16.52 0 -3

Folkestone & Dover 17.60 17.84 0 1

Mid Kent 17.40 18.30 1 5

Portsmouth1 21.00 21.00 0 0

South East 15.00 15.00 0 0

South Staffordshire 15.49 15.78 0 2

Sutton & East Surrey 19.00 19.00 0 0

Tendring Hundred 20.00 20.00 0 0

Three Valleys 17.60 17.80 0 1

Note:

1 These charges apply from 1 July.


37

Table 13 Comparison of household metered standing charges for 2001-02 and 2002-03 -

water and sewerage companies

£/year ChangeSewerage 2001-02 2002-03 £ %

Anglian 40.00 44.00 4 10

Dwr Cymru 10.00 10.00 0 0


Severn Trent1 8.28 8.40 0 1

South West 8.16 8.28 0 1

Southern 32.00 32.30 0 1

Thames 38.00 38.00 0 0


Wessex 32.00 32.00 0 0

Yorkshire 25.00 25.00 0 0

Combined water and sewerage

Anglian 56.00 64.00 8 14

Dwr Cymru 30.00 30.00 0 0


Severn Trent 24.84 25.08 0 1

South West 24.48 24.84 0 1

Southern 51.00 51.30 0 1

Thames 54.00 54.00 0 0


Wessex 49.00 49.00 0 0

Yorkshire 44.00 44.00 0 0

Notes:1 In addition to the above standing charge, the majority of Severn Trent Water customers pay a fixed charge related to property

type (see below). The remaining customers pay a charge based on the rateable value of their property.1 Flat/terrace £15.721 Semi-detached £31.441 Detached £47.16


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Sewerage standing charges include an amount to recover the customer-related costs ofproviding the foul water service. Additionally, the majority of sewerage companies alsoinclude within the sewerage standing charge the costs associated with providing surfacewater and highway drainage. Dwr Cymru and South West Water, however, recover thesurface water drainage charge through their volumetric rates (see chapter 5). Thisexplains why these two companies have measured sewerage standing charges that aresignificantly lower than the other water and sewerage companies.

Anglian Water was the only company to make any significant change to its measuredsewerage standing charge. It increased its charge from £40 to £44. This is the first partof a transition as Anglian Water transfers highway drainage charges from the volumetricrate to the standing charge.

Tables 14 and 15 show the components of the metered charge for household customers,for water and sewerage, and the average metered household bill for 2002-03. Tables 16and 17 show metered bills for water and for sewerage for different consumption levels for2001-02 and 2002-03.


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Table 14 Metered water tariffs 2002-03 - household customers

Standing Volumetric Averagecharge charge bill in 2002-03£/year p/m3 £

Water & sewerage companies

Anglian1: 94

Anglian - Standard 20.00 81.44

- SoLow 0.00 108.11

- Aquacare Plus 50.00 51.44

Hartlepool - Standard 20.00 52.56

- SoLow 0.00 79.23

- Aquacare Plus 36.00 36.56

Dwr Cymru 20.00 88.80 79

Northumbrian: 16.80

Essex and Suffolk: 84

Essex 65.13

Suffolk 88.44

Northumbrian 55.96 76

Severn Trent 16.68 77.07 91

South West 16.56 81.30 89

Southern 19.00 58.60 85

Thames 16.00 62.21 94

United Utilities 20.00 77.40 100

Wessex 17.00 84.61 95

Yorkshire: 19.00

Yorkshire 76.20 87

York 50.50 75


Bournemouth & W Hampshire 17.50 62.00 93

Bristol 19.50 71.96 86

Cambridge 20.00 57.80 81

Cholderton 18.00 80.80 169

Dee Valley: 16.52 73

Chester 60.74

Wrexham 65.75

Folkestone & Dover 17.84 78.16 103

Mid Kent1: 111

– Standard 18.30 74.15

– Low User 0.00 98.55

– Helpu/Medico 45.00 47.50

Portsmouth2 21.00 47.80 84

South East: 15.00 108

Mid Southern 57.07

Eastbourne 100.39

Mid-Sussex 104.92

West Kent 83.85

South Staffordshire 15.78 61.15 82

Sutton & East Surrey: 19.00 109

Northern Area 59.25

Southern Area 76.80

Tendring Hundred 20.00 126.60 121

Three Valleys: 17.80

North Surrey 57.91 79

Three Valleys 57.91 84

Notes:1 Anglian Water and Mid Kent Water have three options available to metered household customers.2 These charges apply from 1 July 2002.


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Table 15 Metered sewerage tariffs 2002-03 - household customers

Standing Volumetric Averagecharge charge bill in 2002-03£/year p/m3 £


Anglian1: 129

– Standard 44.00 96.88

– SoLow 0.00 155.55

– Aquacare Plus 90.00 50.88

Dwr Cymru 10.00 110.35 89

Northumbrian 43.00 55.90 101

Severn Trent2: 8.40 48.20 89

Property based fixed charge:

Flat/terrace 15.72

Semi-detached 31.44

Detached 47.16

South West 8.28 162.00 145

Southern 32.30 87.97 131

Thames 38.00 43.44 83

United Utilities 55.00 57.70 114

Wessex 32.00 87.00 111

Yorkshire 25.00 76.19 91

Notes:The volumetric charges have been standardised to take account of different non-return to sewer assumptions for each company.

1 Anglian Water has three tariff options available to metered household customers.2 In addition to the above standing and volumetric charge, the majority of Severn Trent Water’s customers pay a fixed charge

related to property type for surface water drainage. The remaining customers pay a charge based on the rateable value of theirproperties:

Zone 1 17.78p/£RV

Zone 2 14.96p/£RV

Zone 3 15.87p/£RV

Zone 4 17.15p/£RV

Zone 5 20.05p/£RV

Zone 6 19.39p/£RV

Zone 7 18.89p/£RV

Zone 8 15.87p/£RV


41

Table 16 Sample metered water bills in 2001-02 and 2002-03 - household customers

Annual bill in £ for annual consumption of60 m3 110 m3 160 m3

2001-02 2002-03 2001-02 2002-03 2001-02 2002-03Water & sewerage companies

Anglian1:

Anglian 60.70 64.87 103.82 109.58 143.74 150.30

Hartlepool 45.05 47.54 73.26 77.82 97.47 104.10

Dwr Cymru 72.95 73.28 117.08 117.68 161.20 162.08

Northumbrian:

Essex 55.72 55.88 88.16 88.44 120.59 121.01

Suffolk 69.65 69.86 113.70 114.08 157.74 158.30

Northumbrian 50.05 50.38 77.75 78.36 105.46 106.34

Severn Trent 62.81 62.92 101.35 101.46 139.89 139.99

South West 62.25 65.34 100.53 105.99 138.80 146.64

Southern 54.46 54.16 84.01 83.46 113.56 112.76

Thames 52.95 53.33 83.75 84.43 114.54 115.54


Wessex 67.08 67.77 108.81 110.07 150.54 152.38

Yorkshire:

Yorkshire 64.06 64.72 101.61 102.82 139.16 140.92

York 49.00 49.30 74.00 74.55 99.00 99.80


Bournemouth & W Hampshire 53.95 54.70 84.74 85.70 115.53 116.70

Bristol 60.67 62.68 95.40 98.66 130.12 134.64

Cambridge 53.68 54.68 82.58 83.58 111.48 112.48

Cholderton 65.66 66.48 105.71 106.88 145.76 147.28

Dee Valley:

Chester 52.42 52.96 81.93 83.33 111.45 113.70

Wrexham 56.61 55.98 89.61 88.86 122.62 121.74

Folkestone & Dover 63.80 64.74 102.30 103.82 140.80 142.90

Mid Kent1 56.69 59.13 95.81 99.87 131.45 136.94

Portsmouth2 49.68 49.68 73.58 73.58 97.48 97.48

South East:

Mid Southern 51.05 49.24 81.10 77.78 111.14 106.31

Eastbourne 78.43 75.23 131.29 125.43 184.15 175.62

Mid-Sussex 81.29 77.95 136.54 130.41 191.78 182.87

West Kent 67.97 65.31 112.12 107.24 156.26 149.16

South Staffordshire 51.49 52.47 81.49 83.05 111.49 113.62

Sutton & East Surrey:

Northern Area 54.16 54.55 83.46 84.18 112.76 113.80

Southern Area 64.60 65.08 102.60 103.48 140.60 141.88

Tendring Hundred 92.00 95.96 152.00 159.26 212.00 222.56

Three Valleys:

North Surrey 51.90 52.55 80.49 81.50 109.07 110.46

Three Valleys 51.90 52.55 80.49 81.50 109.07 110.46

Notes:Bill = standing charge + (consumption x volumetric charge).1 Annual bills for 60m3 are based on Anglian Water’s SoLow and Mid Kent Water’s Low User tariffs (see table 14).2 Bills for year beginning 1 July.


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Table 17 Sample metered sewerage bills in 2001-02 and 2002-03 - household customers

Annual bill in £ for annual consumption of60 m3 110 m3 160 m3

2001-02 2002-03 2001-02 2002-03 2001-02 2002-03Water & sewerage companies

Anglian1 88.84 93.33 144.20 150.56 191.56 199.00

Dwr Cymru 73.95 76.21 127.24 131.39 180.53 186.56

Northumbrian 76.13 76.54 103.73 104.49 131.34 132.44

Severn Trent2:

Property based fixed charge:

Flat/terrace 52.52 53.04 76.39 77.14 100.26 101.24

Semi-detached 68.12 68.76 91.99 92.86 115.86 116.96

Detached 83.72 84.48 107.59 108.58 131.46 132.68

Rateable value charge:

Zone 4 71.14 71.62 95.01 95.72 118.88 119.82

South West 99.72 105.48 176.02 186.48 252.32 267.49

Southern 84.34 85.08 127.95 129.06 171.56 173.05

Thames 63.95 64.06 85.58 85.78 107.20 107.50


Wessex 82.72 84.20 124.98 127.70 167.25 171.20

Yorkshire 70.32 70.71 108.08 108.81 145.84 146.90

Notes:

Bill = standing charge + (consumption x volumetric charge).

1 Anglian Water’s annual bill for 60m3 is based on its SoLow tariff (see table 15).

2 In addition to the above standing and volumetric charge, the majority of Severn Trent Water’s customers pay a fixed charge relatedto property type for surface water drainage. The remaining customers pay a charge based on the rateable value of their property. Arateable value of £200 is assumed for the rateable value charge.


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Standing charges for non-householdsExcept for Anglian Water (for both water and sewerage), United Utilities Water andNorthumbrian Water (for sewerage), all companies base the non-household standingcharge on meter size. These charges are higher than those for households because non-household users are billed more frequently and because larger meters are moreexpensive to maintain and replace. However, Bristol Water, Hartlepool Water and Suttonand East Surrey Water all charge non-households a uniform standing charge equal tothe measured household standing charge.

Details of non-household metered standing charges for both water and sewerage can be found in annex D.

We expect companies’ standing charges for non-households to reflect no more than thecustomer-related and meter-related costs associated with providing a measured supply.We have required companies to reduce their standing charges for larger meter sizeswhere these were significantly above the industry average.

Four companies (United Utilities Water, Southern Water, Thames Water and WessexWater) have non-household sewerage standing charges that are higher than average.This is because these companies include the costs of both surface water and highwaydrainage within the sewerage standing charge (see chapter 5).

Low user tariffs

Two companies - Anglian Water (including Hartlepool Water) and Mid Kent Water – have a metered tariff for low usage households. The tariffs have no standing charge but a higher than standard volumetric charge. To benefit from the tariff, customers must useno more than the break-even volume (the volume above which the tariff is no longerbeneficial). This is currently 75m3 per year for both companies.

Following consultation, we set out our position on optional low user tariffs in MD165.The consultation showed that there was only limited support for them. Therefore, we arenot willing to accept new proposals from companies who wish to introduce such tariffs.However, we have not required Anglian Water or Mid Kent Water to withdraw their existing low user tariffs due to the adverse effects this would potentially create forcustomers currently on the tariff.


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4. Metering and tariffs

We consider that metering is the fairest method of charging for water. It relates chargesto the amount of water used or sewage discharged and, hence, to costs. Research7

undertaken for us in the early 1990s found widespread customer support for the principle of paying for water according to the amount used. The Government’s policydocument, ‘Water charging in England and Wales: Decisions following consultation’,issued in November 1999, acknowledged the value of metering, both as a means ofmanaging demand and in giving customers choice in paying for water.

We consider that companies should meter where it is economic to do so. For example:in new properties; in non-households; where there is a high discretionary use of water;or where resources are limited. We also expect companies to install meter boxes whenundertaking work on service pipes, so that a meter can be cheaply installed at a laterdate. But we do not advocate universal metering because, for many customers, the extracapital and operating costs of metering might outweigh the benefits in water savings.

The majority of companies meter new household properties. Most companies also haveprogrammes to meter households which use large amounts of water for non-domesticpurposes, for example swimming pools or sprinklers for garden watering. We supportthese programmes. These rights to meter are not affected by the Regulations made under the WIA 99 (see chapter 2).

Tables 18 and 19 show the proportions of customers that companies expect to have a metered supply in 2002-03.

7 ‘Paying for water – a time for decisions’ (1991).


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Table 18 Proportion of water customers taking metered supplies in 2001-02 and 2002-03

Per centHouseholds Non-households

2001-02 2002-03 2001-02 2002-03Water & sewerage companies

Anglian 48.1 50.5 93.9 94.2

Dwr Cymru 12.0 14.9 85.2 86.0

Northumbrian:

Northumbrian 6.9 7.9 67.1 72.2

Essex & Suffolk 29.1 31.1 90.1 90.2

Severn Trent 20.4 21.9 94.2 94.6

South West 32.1 37.2 91.5 91.9

Southern 21.8 24.0 77.2 77.2

Thames 18.2 19.1 87.9 88.2


Wessex 27.7 30.4 84.2 85.2

Yorkshire:

Yorkshire 22.5 24.8 84.3 84.5

York 6.0 7.6 87.7 87.6

WaSC average 21.2 23.1 87.7 88.3


Bournemouth & W Hampshire 22.5 24.7 89.6 91.9

Bristol 18.4 20.9 79.3 80.1

Cambridge 48.8 52.1 88.6 89.4

Cholderton 10.9 10.9 76.5 76.5

Dee Valley 25.6 27.9 88.9 88.9

Folkestone & Dover 34.0 35.6 83.1 83.6

Mid Kent 24.6 29.0 90.6 91.2

Portsmouth 2.6 3.3 84.1 84.6

South East 24.7 27.8 80.9 80.9

South Staffordshire 11.7 13.2 74.6 81.2

Sutton & East Surrey 15.5 18.1 82.5 82.5

Tendring Hundred 49.3 53.7 97.9 98.0

Three Valleys:

Three Valleys 17.7 19.3 80.5 82.5

North Surrey 20.2 18.8 83.1 84.1

WoC average 19.4 21.4 82.2 83.8

Industry average 20.8 22.8 86.8 87.5

Note:

The percentage of metered customers for 2001-02 and 2002-03 are estimates based on provisional and forecast data provided byeach company.


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Table 19 Proportion of sewerage customers taking metered supplies in 2001-02

and 2002-03

Per centHouseholds Non Households

2001-02 2002-03 2001-02 2002-03Water & sewerage companies

Anglian 47.2 49.7 91.5 92.1

Dwr Cymru 12.5 15.4 82.3 83.6

Northumbrian 6.6 7.6 54.9 58.3

Severn Trent 19.1 20.6 91.6 93.0

South West 33.0 38.6 86.6 87.2

Southern 19.8 21.8 74.6 74.6

Thames 17.3 18.6 83.6 84.0


Wessex 21.5 23.8 81.4 83.3

Yorkshire 21.9 24.1 79.5 79.8

Industry average 20.5 22.4 83.7 84.5

Note:The percentage of metered customers for 2001-02 and 2002-03 are estimates based on provisional and forecast data provided by each company.

In 2002-03, the majority of household customers (77.2%) across England and Wales will remain with unmeasured water supplies. However, the proportion of customersmetered by each company varies considerably. In 2002-03, Tendring Hundred Waterexpects to have the highest proportion of households with meters (53.7%) andPortsmouth Water the lowest (3.3%).

Since 1 April 2000 all household customers are entitled to have a meter installed free ofcharge (see chapter 2). The price limits set for 2000-05 allowed for 1.7 million optionalmeters to be installed in this period.

The efficient use of water

Since February 1996, companies have had a duty to promote the efficient use of waterby all their customers. Companies submitted their second five-year water efficiency plans for the period 2000-05, in July 2000. We expect companies to focus on the mostcost-effective schemes or those that are of most benefit to customers in their promotionof efficient use of water initiatives.


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We expect companies to approach metering in a way that is consistent with the existinglegal framework and that supports an efficient strategy for balancing supply and demand. In this context, we consider that the right of companies in England to apply fordesignation under the WIA 99 as an area of water scarcity could play a significant role.Paying on a measured tariff, particularly where there is high non-essential use, is animportant means of ensuring that customers have clear signals about the value of waterin areas where resources may be limited.

Managing demand for water

Tariff structures should provide measured customers with appropriate incentives toconserve water.

Long run marginal cost (LRMC) is a measure of the continuing cost of maintaining abalance between supply and demand. We detailed our approach to LRMC in MD1708.

We expect that for expenditure to meet any growth in demand should normally be paidfor by changes in bills (and therefore revenue) and not by increased price limits. A tariffstructure based on LRMC would help to achieve this.

We have emphasised the role of metering and tariffs in managing demand for water,particularly where seasonal peaks in demand are caused by garden watering. Previousstudies carried out by the water companies and by Ofwat show that summertime peakdemands are largely the result of households making high discretionary use of water fornon-domestic purposes, particularly garden watering. These studies have also shownthat selective metering has a significant impact on reducing peak demand by as much as 30%.

Companies should therefore require customers who make high discretionary use ofwater for non-domestic purposes, such as sprinkler users, to be metered. We madeallowances in price limits for the period 2000-05 for companies to implementprogrammes of selective metering as part of their supply/demand strategies.

8 MD170 ‘The role of long run marginal cost in the provision and regulation of water services’ (May 2001).


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Alternative measured tariffs

As metering becomes more widespread, companies may need to examine more sophisticated tariff structures. Peak demand and/or seasonal tariffs could be part of thecompanies’ plans for maintaining the supply/demand balance.

In 1998-99, Tendring Hundred Water extended its seasonal tariff to customers usingmore than 3 Ml per year. Bournemouth and West Hampshire Water introduced a broadlysimilar tariff for its larger customers in the same year.

In 2000-01, Severn Trent Water replaced its previous large user water tariff with a tariffstructured with a varying seasonal volumetric element. In 2001-02 it extended itsseasonal tariff to include customers consuming 20 Ml or more (see chapter 6). A numberof other companies are currently considering the merits of seasonal tariffs.

These tariffs are structured with an increased volumetric element during the summermonths and a decreased one for the remainder of the year. They offer an incentive tocustomers with high summer demand to be more efficient in their use of water. They also ensure that, should customers choose to have greater consumption during thesummer, their charges will reflect the cost of meeting this demand.

A number of peak demand tariffs have also been introduced in recent years. However,these are currently limited to large users (see chapter 6 for further details).


49


50

5. Charges for sewerage services

Charges made by companies for sewerage services cover three main activities. Theseare the collection and treatment of:

• surface drainage (run-off from rainwater that falls on to customers’ properties);• highway drainage (run-off from roads and pavements) and• foul sewage and trade effluent.

In principle, all customers who can demonstrate that they do not receive a specificsewerage service should be entitled to an appropriate abatement of charges.

Surface and highway drainage

There are a number of difficulties associated with estimating and recovering the costs of providing surface and highway drainage. We continue to encourage companies todevelop a better understanding of the costs attributable to surface and highway drainage.

Historically, companies have charged customers for surface and highway drainageservices in a variety of ways. For example:

• as part of the volumetric rate;• as a flat fee within the fixed charge;• by reference to the RV of the property;• via a charge related to property type; or• via a charge related to the surface area drained to the public sewer.

Often, companies have used a combination of two or more of the above methods.

The costs of surface drainage generally depend upon the surface area of the propertydrained to the sewer and the nature of surface water run-off, as well as the capacity andextent of the sewerage system.

Most companies argue that it is fairer (for customers as a whole) to recover surfacedrainage costs through a fixed charge (ie as a form of property tax). This charging basisis also simple to understand and cheap to administer.

A few companies argue that charging for surface drainage with reference to the area of the property drained reflects the costs involved more accurately. Severn Trent Water(since 1990-91) and Yorkshire Water (from 2001-02) charge on this basis for non-households. At least one other company is currently considering the merits of chargingnon-households in this way.

A few others argue that, because sewerage capacity is designed on a multiple of dryweather flows, surface drainage costs are ultimately driven by sewage volumes. Theyargue that charging through the volumetric rate is, therefore, equally appropriate.

The cost of highway drainage is not related to the use which water and seweragecustomers make of the sewerage system. As such there is not one correct way ofallocating the costs of this service. Because highway drainage benefits all those using roads either directly or indirectly, there is a case for recovering the costs of theservice from highway authorities or from users of the highway. At present, the lawprevents this option.

In ‘Water charging in England and Wales: Government decisions following consultation’,published in November 1998, the Government indicated that there will be no change forthe time being in the way in which highway drainage charges are collected. It suggestedthat there might be little benefit in any change and that the cost of the service would stillhave to be collected through other charges, such as the council tax.

These costs continue, therefore, to be recovered from sewerage customers. Customerswho are not connected to the sewerage system, therefore, may not be contributing to thecosts of highway drainage.

Current charges for surface and highway drainageThe way companies recover surface and highway drainage costs varies betweenmeasured and unmeasured household customers.

For measured households, eight of the ten water and sewerage companies include thecosts associated with the provision of surface drainage within the measured standingcharge. Only two companies, D ^wr Cymru, and South West Water, include the cost ofsurface water drainage within the volumetric rate.

For measured non-households four of the ten water and sewerage companies includethe costs associated with the provision of surface drainage within the measured standing charge. This charge generally varies according to meter size. Two companies(Severn Trent Water and Yorkshire Water) recover these costs through an area-based


51

charge. Two companies (Northumbrian Water and United Utilities Water) primarilyrecover these costs through an RV based charge, and the remaining two companies(D ^wr Cymru, and South West Water) recover them through the volumetric charge.

For unmeasured customers six of the ten water and sewerage companies include thecosts associated with the provision of surface drainage within the fixed charge. Fourcompanies (United Utilities Water, Severn Trent Water, South West Water, and WessexWater) include these costs within the RV-related charge, and so have much lower fixedcharges.

For highway drainage the picture is more mixed. For measured households, fourcompanies include the costs associated with the provision of highway drainage within the standing charge. Four companies include it within the volumetric charge and two split it between the two charges (see table 13 and annex D1 for details of household and non-household sewerage standing charges). Anglian Water is currently in the firstpart of a transition to transfer highway drainage charges from the volumetric rate into the standing charge.

The differences in the way companies recover surface and highway drainage costs are the main reason why the standing charges for measured household sewerage customers vary between companies (see chapter 3). Another reason is that companieshave different estimates of the per property cost of providing the surface water drainageservice. For example, for measured households, companies’ cost estimates vary from£14 per property (for Wessex Water) to over £30 for a semi-detached property (SevernTrent Water).

Provision of foul sewerage only (surface drainage rebates)In MD1529 we required all companies to offer rebates for surface water drainage for allnon-connected customers from April 2000, or to provide an acceptable plan to introducerebates by April 2001. We recognised that this would mean slightly higher charges forconnected customers.

All ten water and sewerage companies now offer rebates to all customers who candemonstrate that the property concerned does not benefit from a surface water drainage service. Rebates should then be automatically applied for future charging years.

9 MD152 ‘Approval of companies’ charges schemes in 2000-01’ (September 1999).


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We do not, however, expect companies to provide rebates retrospectively. If rebates were applied retrospectively, this would mean greater increases in charges for customerswho are connected for the provision of the service. We do not consider this to be eitherpracticable or desirable.

We also said in MD152 that companies must ensure that these provisions are set out on household customers’ bills. We have undertaken monitoring exercises to ensure that all companies provide sufficient information to customers about the availability of the rebate.

Measured household customers receive the rebate in the form of either a lower standingcharge or a lower volumetric charge, while unmeasured customers receive the rebate as either a lower fixed charge or a lower RV charge. On average, however, bothcustomer groups should receive similar reductions (see table 20 for details of theserebates).

Table 20 Surface water drainage rebates 2002-03 - household customers

Unmeasured Measured Fixed Standing Volumetric

Year of charge RV charge charge charge introduction £/year p/£RV £/year p/m3

Water and seweragecompanies

Anglian:

Standard 2000 30.00 n/a 30.00 n/a

SoLow 2000 – – n/a 40.01

D ^wr Cymru 2001 27.00 n/a n/a 19.05

Northumbrian 2001 25.00 n/a 25.00 n/a

Severn Trent1 1984 n/a 14.96-20.05 31.44 n/a

South West 2001 n/a 15.05 n/a 22.93

Southern 2000 18.00 n/a 18.00 n/a

Thames 2000 15.50 n/a 15.50 n/a

United Utilities 1997 n/a 18.60 22.00 n/a

Wessex 2000 n/a 6.50 14.00 n/a

Yorkshire 2000 25.00 n/a 25.00 n/a

Notes:

n/a = no abatement in this element of the charge.

1 The majority of Severn Trent Water’s customers receive a rebate related to property type. The example given here is for a

semi-detached property. For the remaining customers the rebate is based on the rateable value of their property which varies

according to the charging area.


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Generally, companies offer the rebate to non-household customers in a form similar tothat offered to household customers. However, Severn Trent Water and Yorkshire Watercharge their non-household customers according to the surface area of the propertyconcerned. They do not charge customers who are not connected.

Provision of surface water and highway drainage onlyCurrently, six of the ten water and sewerage companies charge a fixed amount forsurface and highway drainage when a property is not connected for the provision of foulsewerage. This ranges from £26 (Southern Water) to £63 (D ^wr Cymru). The remainingcompanies may make a reduction to the RV charge or apply a standing charge based on meter size.

Charging for foul sewage and trade effluent

The costs of foul sewage and trade effluent depend upon the volumes and strengths of the wastewater taken away.

For measured customers, charges for foul sewage are usually based upon the volumesrecorded on the water meter (adjusted where appropriate for non-return to sewerallowances). The majority of unmeasured customers pay for foul sewage by a chargebased on the rateable value of the property. These charges are outlined in chapter 4.

Charges for trade effluent are based on the Mogden formula. This seeks to link chargesto the costs imposed by customers, ie according to the volume and strength of tradeeffluent discharged. The Mogden formula takes account of the standard characteristics of a customer’s discharges, which relate to the level of treatment needed and thereforethe costs involved. These costs are averaged across a region and, therefore, do notreflect the costs incurred at any one treatment works. The collection charge may bereduced if a discharger is connected directly to the treatment works.

Details of companies’ trade effluent tariffs for 2002-03 are shown in table 21 and somesample bills for effluent of different strengths are given in tables 22 and 23.


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Table 21 Trade effluent tariffs 2002-03

Regionalstrengths

Minimumcharge R V Bv M B’ S’ Os Ss

£ p/m3 p/m3 p/m3 p/m3 p/kg p/kg mg/l mg/lWater & sewerage companies

Anglian - Green 180.00 14.17 22.18 4.30 11.88 43.97 39.08 415 390

- Orange 180.00 13.51 21.15 4.09 11.33 41.92 37.29 415 390

- Blue 180.00 13.25 20.73 4.02 11.11 41.11 36.52 415 390

- Industrial 180.00 10.34 16.19 3.13 8.68 32.10 28.51 415 390

D ^wr Cymru1 124.00 17.79 20.25 8.42 12.11 26.29 27.18 500 350

Northumbrian 222.00 18.06 8.83 4.90 – 19.18 36.03 386 187

Severn Trent2 87.54 12.17 11.47 – – 19.53 14.90 351 343

South West 159.00 37.78 34.82 – 6.34 82.40 74.89 744 489

Southern 195.00 25.74 18.79 3.07 16.31 54.89 33.15 452 512

Thames3 77.00 7.19 8.83 – – 25.45 32.28 445 336

United Utilities 120.00 11.10 8.90 1.30 8.50 25.20 28.90 321 230

Wessex 180.00 28.39 15.12 – – 30.97 37.57 802 313

Yorkshire4 211.00 21.32 21.09 – 12.65 22.85 37.49 879 326

Note:Some companies apply the fixed charge for the foul sewerage service in addition to the above, even if there is no domesticstrength discharge.

Charges for B and S are usually expressed in p/m3 relative to standard strength (concentration: usually expressed in mg/litre).

Standard strengths vary from company to company. To maintain comparability, the charges shown here (B’ and S’) are correctedfor standard strength and shown as p/kg.

1 D ^wr Cymru has a reduced R charge of 11.69p/m3 for >100,000m3 per annum.2 Severn Trent Water has a banded R charge, ≤ 49,999m3 is charged at the standard rate of 12.17p/m3, then ≥ 50,000m3 to

< 250,000m3 is charged at 11.80p/m3 and ≥ 250,000m3 at 9.47p/m3.3 Thames Water has a large user trade effluent tariff for customers with an annual bill > £59,000. This includes a fixed charge

based on meter size, an annual charge of £10,000 and reception and treatment charges of R = 5.72p/m3, V = 7.03p/m3, B’ = 20.26p/m3 and S’ = 25.69p/m3.

4 Yorkshire Water has a banded R charge, ≤ 50,000m3 is charged at the standard rate of 21.32p/m3, then > 50,000m3 to ≤ 250,000m3 is charged at 11.79p/m3 and > 250,000m3 at 8.04p/m3. The M charge is calculated as 60% of the V charge.

Charges are calculated according to the Mogden formula:

Charge = R +[(V + Bv) or M] + B(Ot/Os) + S(St/Ss)

Key:R - reception and conveyance

V - primary treatment (V for volumetric)

Bv - additional volume charge if there is biological treatment

M - treatment and disposal where effluent goes to a sea outfall (M for marine)

Ot - chemical oxygen demand (COD) of effluent after one hour quiescent settlement at ph 7

Os - COD of crude sewage after one hour quiescent settlement

St - total suspended solids (mg/litre) of trade effluent at ph 7

Ss - total suspended solids (mg/litre) of crude sewage

B’ - B/Os x 1000 , ie B corrected for average regional strength

S’ - S/Ss x 1000, ie S corrected for average regional strength

B - biological oxidation of settled sewage

S - treatment and disposal of primary sludge


55

Table 22 Sample trade effluent bills in 2001-02 and 2002-03 - 5,000m3 of low strengtheffluent

£/year Change 2001-02 2002-03 £ %


Anglian1 2,752 2,916 164 6

D ^wr Cymru 2,994 2,994 0 0

Northumbrian 2,292 2,322 30 1

Severn Trent 1,585 1,601 16 1

South West 5,225 5,577 352 7

Southern 3,370 3,426 56 2

Thames 1,524 1,540 16 1

United Utilities 1,785 1,751 -35 -2

Wessex 2,810 3,049 239 8

Yorkshire 2,887 2,911 24 1

Notes:All bills are shown rounded to the nearest £. The change may not reconcile due to rounding.Bills do not take into account any sewerage charges that may be payable. Some companies apply the fixed charge for the foulsewerage service even if there is no domestic strength discharge.1 Anglian Water’s sample trade effluent bill for 2001-02 and 2002-03 is based on its Streamline Orange tariff.

Bills for full treatment of effluent are calculated according to the Mogden formula, where the effluent characteristics are:volume (m3) 5,000COD (mg/l) 200 (0.2kg/m3)SS (mg/l) 300 (0.3kg/m3)

Charge = (R + V + Bv + B’*0.2 + S’*0.3)*5,000

Table 23 Sample trade effluent bills in 2001-02 and 2002-03 - 5,000m3 of high strengtheffluent

£/year Change 2001-02 2002-03 £ %

Water & sewerage companiesAnglian1 8,563 8,865 302 4

D ^wr Cymru 6,968 6,968 0 0

Northumbrian 5,714 5,789 75 1

Severn Trent 4,326 4,368 42 1

South West 16,559 17,675 1,116 7

Southern 10,721 10,899 178 2

Thames 5,581 5,596 15 0

United Utilities 5,773 5,660 -113 -2

Wessex 7,691 7,925 234 3

Yorkshire 6,792 6,851 59 1

Notes:All bills are shown rounded to the nearest £. The change may not reconcile due to rounding.Bills do not take into account any sewerage charges that may be payable. Some companies apply the fixed charge for the foulsewerage service even if there is no domestic strength discharge.1 Anglian Water’s sample trade effluent bill for 2001-02 and 2002-03 is based on its Streamline Blue tariff.

Bills for full treatment of effluent are calculated according to the Mogden formula, where the effluent characteristics are:volume (m3) 5,000 COD (mg/l) 2,500 (2.5 kg/m3)SS (mg/l) 1,000 (1.0 kg/m3)

Charge = (R + V + Bv + B’*2.5 + S’*1.0)*5,000


56

The balance between measured sewerage and trade effluent charges

We expect to see an appropriate balance between the charges made for trade effluentand for domestic foul sewerage. Our assessment of balance is based on a simple test.If charges for measured sewerage and trade effluent services are broadly in balance,then a comparison between the measured sewerage charge and a notional trade effluent charge for domestic strength effluent should produce similar indicative bills.

Thus, for a given volume of effluent, differences between bills for domestic and tradesources should only be related to differences in strength. Similarly, for effluent of a given strength, differences in bills should only reflect any difference in the volume ofeffluent.

We assess the balance between sewerage and trade effluent charges by subtracting the notional trade effluent charge from the measured sewerage volumetric charge. InRD26/0010 we set out the calculation and adjusted the strengths assumed for domesticsewage used to estimate the notional trade effluent charge.

A positive differential suggests that charges to measured sewerage customers are toohigh when compared with charges to trade effluent customers. Likewise, a negativedifferential suggests that charges to trade effluent customers are too high whencompared with charges to measured sewerage customers.

In MD15211 we set out our view that, for the charges to be considered broadly in balance,the differential should fall within a range ±5p/m

3.

Table 24 shows a differential calculated to reflect current levels of treatment for sewagefor 2001-02 and 2002-03. The table shows that all companies now fall within ourprescribed range.

10 RD26/00 ‘The household sewerage/trade effluent differential: confirmation of adjustments of Ofwat methodology’(December 2000).

11 MD152 ‘Approval of companies charges schemes in 2000-01’ (September 1999).


57

Table 24 Comparison of measured household sewerage and trade effluent tariffs for 2001-02 and 2002-031

Differential reflectingaverage levels of treatment Change

p/m3 p/m3

2001-02 2002-03Water and sewerage companiesAnglian2 -4 5 9

D ^wr Cymru 1 -3 -4

Northumbrian -1 -1 0

Severn Trent 2 2 0

South West -4 0 4

Southern 8 4 -4

Thames -4 -4 0

United Utilities 4 3 -1

Wessex 9 4 -5

Yorkshire -4 -4 0

Notes:1 All figures are calculated:

– net of surface and highway drainage;

– using forecast treatment loads for 2002-03; and

– using assumed effluent characteristics: COD (mg/l) - 650 and SS (mg/l) for 450.

2 The differential for Anglian Water has been calculated using its Streamline Green tariff for trade effluent.

The balance between trade effluent volume and strength charges

In the past few years there has been a trend for companies to adjust the relative balanceof their volume and strength charges within the Mogden formula. Some companiesincreased their charges for reception and conveyance of trade effluent, while decreasingtheir charges for biological treatment and the treatment and disposal of sludge.

We accept that any such changes to the Mogden charges can be justified if they result in a charging formula which better reflects the costs involved in treating trade effluent.For example, Northumbrian Water introduced a separate charge (Bv) in 2001-02 toreflect the volume related costs associated with secondary treatment.

We believe this refinement has achieved a better balance between the different treatment elements within the current Mogden charging formula. However, we requirerobust calculation of the cost-reflective level for the Mogden charges to allay fears thatcompanies could be engaging in anti-competitive pricing for treatment services.


58

Long run marginal cost of treating and disposing of trade effluent

Although often considered in the context of the water service, the use of LRMCestimates is also important12 when considering tariffs for the sewerage service.

In RD 14/0113 we stated that we do not expect incumbents to reduce treatment chargesartificially by comparison with conveyance charges because this could prevent furthercompetition from emerging. Where companies propose lower treatment charges, theymust be justified by proper reference to long run marginal costs and we expect robustcalculations in such cases.

Large user tariffs for foul sewage and trade effluent

Seven water and sewerage companies (all except United Utilities Water, NorthumbrianWater and Wessex Water) offer large user foul sewage tariffs (see chapter 6).

Five of these companies also offer large user tariffs for trade effluent customers. Threecompanies (D ^wr Cymru, Severn Trent Water, and Yorkshire Water) offer a reducedcharge for collection (ie a lower ‘R’ charge) and two companies (Anglian Water andThames Water) offer reduced charges for both collection and treatment (ie lower ‘R’, ‘V’, ‘B’ and ‘S’ charges).

Charges for tankered domestic waste

Owners of cesspools and septic tanks employ private tanker operators to transport thiswaste to treatment works. The sewerage undertaker levies a charge on the tankeroperator for disposal of the waste, which the tanker operator passes on to the customer,together with its own costs. The charges made by sewerage undertakers to tankeroperators for 2002-03 are given in table 25.

12 See RD 21/97, RD 7/98, RD 30/98 for our policy on sewer connection agreements.13 RD 14/01 ‘Approval of companies’ charges schemes 2002-03: Tariff policy issues’ (September 2001).


59

Table 25 Tankered domestic waste charges 2002-03

£/m3

Effluent strengthMediuma Strongb Weakc

Water & sewerage companiesAnglian 5.11 5.11 5.11

D ^wr Cymru1 5.52 3.33

Northumbrian 7.27 7.27 1.26

Severn Trent2 – 6.44 0.51

South West3 7.15 7.15 1.65

Southern4 3.97 4.80 2.61

Thames5 3.82 6.33 0.93

United Utilities 5.01 5.01 5.01

Wessex 6.01 6.01 6.01

Yorkshire6 5.45 20.78 1.51

Notes:Strength thresholds vary from company to company1 For D ^wr Cymru the charges are for:

b. strong loads, suspended solids between 2,000mg/l and 20,000mg/l;

c. weak loads, suspended solids below 2,000mg/l.2 Charges are in addition to a £5 fixed charge per individual tanker load and are for:

b. strong loads, suspended solids of 800mg/l and above;

c. weak loads, suspended solids of less than 800mg/l.3 For South West Water the charges are for:

b. strong loads, suspended solids between 1,000mg/l and above;

c. weak loads, suspended solids below 1,000mg/l.4 For Southern Water the charges are for:

a. indeterminable strength;

b. strong loads, suspended solids above 2000mg/l;

c. weak loads, suspended solids of less than 2000mg/l.5 For Thames Water the charges are for:

a unmonitored loads;

b monitored loads, suspended solids of 400mg/l and above;

c monitored loads, suspended solids of 399mg/l or less. Most cesspool effluent will be charged at the lower rate.6 Charges are in addition to a £6.50 standing charge per individual tanker and are for:

a standard loads, suspended solids of 2,000mg/l to 9,000mg/l;

b strong loads, suspended solids above 9,000mg/l;

c weak loads, suspended solids of less than 2,000mg/l.

Sewerage undertakers are not legally obliged to provide this service. As such, Ofwatcurrently has no jurisdiction to regulate these charges, either under condition B (relatingto the tariff basket) or condition E (relating to undue discrimination or preference). Nor dowe have regulatory jurisdiction over the charges made by tanker operators. We considerthat a Water Bill should contain provisions bringing the reception, treatment and disposalof this waste within the regulated business. This would give owners of cesspools andseptic tanks similar protection to customers on mains sewerage.


60

Under the Competition Act 1998, Ofwat has powers concurrent with the Office of FairTrading to investigate commercial activities connected with the provision of water andsewerage services. We may use the powers to investigate complaints about the provision of these sewerage services. We will consider whether this is an effective means of redress in individual cases.

Following the principle of cost-reflective charges, we believe it to be more appropriate for companies to offer separate charges for septic tank and cesspool waste. Sevencompanies have now brought in separate charges for different types of waste, one more than in 2001-02.


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6. Large user tariffs

In response to competitive pressures, companies have continued to review their costallocations between different classes of customers and to develop tariffs for large usercustomers.

Companies have reduced the thresholds and / or the volumetric rates for large usertariffs. A few companies have introduced innovative tariffs for large users designed toalign tariffs more closely to the costs of supply and to maintain incentives for customersto use water more efficiently.

Our role in regulating large user tariffs is:

• to prevent undue discrimination and undue preference;

• to prevent potential abuses of a dominant market position and other anti-competitivebehaviour; and

• to ensure that tariffs are structured to send appropriate price signals.

Since 1999, we have amended the licences of all companies to remove tariffs forcustomers using not less than 250 Ml/year from the tariff basket with effect from 1 April2000. The wording of the amended licence allows for an automatic amendment when the consumption threshold for inset appointments for large users is redefined.

Regulations to lower the threshold for inset appointments to customers of companies in England

14using not less than 100 Ml/year came into force on 17 August 2000. From

April 2001 charges to customers of companies in England supplied with not less than100 Ml of water per year (or sewerage customers supplied with not less than 100 Ml ofwater per year) have been outside the tariff basket. These are treated as excludedcharges.

Taking large users out of the tariff basket means that companies cannot automaticallyrecoup, from other customers, revenue lost as a result of reducing charges to their largeusers. These large users are part of an emerging competitive market, so large user tariffs do not require the same degree of regulation as tariffs for other groups ofcustomers.

14 The 250 MI/yr threshold is retained in Wales.


62

Principles underlying large user tariffs As far as practicable, companies should base large user tariffs on a robust allocation ofaccounting costs over the classes of customers concerned. We noted in MD15915 thatfailure to do this is the principal means by which abuses of market power and unduediscrimination are assessed.

The principles underlying our approach to large user tariffs are set out below:

• Unit charges should not be lower for large business customers simply because theyuse a large amount of water.

• Charges can reflect the lower costs of delivering large quantities of water to a singlepoint of delivery, which does not require the use of all levels of the distributionsystem.

• Tariffs should be structured to avoid incentives to waste water.

The majority of companies structure their large user tariffs with a higher fixed charge anda lower volumetric rate for all water consumed. A few companies have introduced a tariffwith a lower volumetric rate for all consumption above a certain threshold, generally withno fixed charge additional to the customer-related standing charge. Both structures aredesigned to avoid the incentive to use more water solely to qualify for the tariff.

We monitor year-on-year changes to the difference between large user tariffs andhousehold tariffs to ensure that the former are not unduly preferential.

Tariffs for large users must also be consistent with robust estimates of LRMC. This isparticularly important in areas where water resources are constrained.

Long run marginal cost of supply We continue to emphasise the importance of using LRMC as a basis for setting tariffs totake account of future demand for water and sewerage services.

The use of LRMC is particularly relevant to the balance between volumetric rates andfixed/standing charges. Volumetric rates should reflect LRMC as closely as possible toprovide appropriate incentives for efficiency in the use of water and to recover the costsof continuing supply. Its use would also ensure that, when their demand falls, large usersenjoy bill reductions that reflect their suppliers’ cost savings. Ofwat also regards the useof LRMC as a key reference point for decisions in other major policy areas, in addition tolarge user tariffs.

15 MD159 ‘LRMC and the Regulatory Framework’ (February 2000).


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Under cover of MD170 we published a series of reports, collectively titled ‘The role ofLRMC in the provision and regulation of water services’. In report A we noted that, forsome companies, the long run marginal cost of supply (either zonal or regionallyaveraged) could exceed equivalent average accounting cost measures. It may then bedifficult to reconcile LRMC related volumetric rates with a significant average accountingcost discount.

In these circumstances, we believe that companies should consider alternative methodsfor aligning the recovery of average allocated costs while maintaining incentives that areconsistent with long run marginal costs. These methods could include:

• Introducing seasonal or interruptible tariffs, especially where peak demands areimportant investment drivers.

• Introducing innovative rising block or capacity reservation tariff structures.

• Restricting the discounted tariff to large users located in relatively less constrainedresource zones.

For other companies the long run marginal cost of supply (either zonal or regionallyaveraged) may fall well below equivalent average accounting cost measures. It may then be difficult to reconcile LRMC related volumetric rates without a significant averageaccounting cost discount.

In RD 17/0116 we set out our conclusions following responses to MD170. We confirmedthat where there are significant zonal LRMC disparities we will expect regionallyaveraged volumetric rates to be set in the upper part of the range of zonal LRMCs.

In MD16317 we said that companies can price down to LRMC provided that they do notseek to finance this policy by increasing prices to other customers.

Company estimates of LRMCThe figures in tables 26 and 27 are the most recent estimates that companies haveprovided. They are for the LRMC of meeting peak demand and of meeting steadydemand on a company-wide or regional basis. Where companies have provided LRMCestimates for only a part of the company area, this has been indicated in the tables.

16 RD 17/01 ‘The role of long run marginal costs in the provision and regulation of water services’ (October 2001).

17 MD163 ‘Pricing issues for common carriage’ (June 2000).


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Table 26 Long run marginal cost estimates - steady demand1

2001-02 pricesResources Treatment Bulk Local Total

transport distribution LRMCp/m3 p/m3 p/m3 p/m3 p/m3

Water and sewerage companies

Anglian:

Anglian2, 3 16 12 15 1 45

Hartlepool2, 4 n/a n/a n/a n/a 13 to 27

D ^wr Cymru2, 3, 4 n/a n/a n/a n/a 47

Northumbrian:

Northumbrian2, 3, 5 11 5 28 13 58

Essex & Suffolk:

Essex4,12 n/a n/a n/a 12 56

Suffolk7,12 66 0 0 20 86

Severn Trent13 13 15 15 15 58

South West2 22 21 n/a 7 49

Southern4 n/a n/a n/a n/a 37

Thames2, 3, 9 42 3 2 1 49

United Utilities 20 5 11 12 49

Wessex8 12 12 25 75 125

Yorkshire:

Yorkshire2, 7 25 0 0 2 27

York2, 3, 10 0 10 13 4 27

Water only companiesBournemouth & W Hampshire8 17 9 0 26 53

Bristol2, 3 14 2 0 0 16

Cambridge2, 3 40 4 0 9 54

Dee Valley2, 3 10 19 0 25 54

Folkestone & Dover2, 3 36 3 19 0 58

Mid Kent2, 3,10 0 95 25 0 120

Portsmouth8, 10 3 0 1 5 9

South East:

Northern2, 11 16 9 11 23 60

Southern2, 11 24 45 30 23 123

South Staffordshire2 9 6 16 11 41

Sutton & East Surrey8, 10 39 0 n/a 25 64

Tendring Hundred2 33 7 0 9 48

Three Valleys:

Three Valleys2, 3 8 14 13 0 35

North Surrey2, 3 34 28 24 4 n/a

Notes:All figures are rounded to the nearest p/m3. The total LRMC figure may not add up due to rounding.n/a= not available.1 The LRMC for steady demand is defined as the cost of an increment of load for which peak demand equals average weekly

demand.2 Prices assumed to be in 1997/98 price base and converted to November 2001 prices using RPI index.3 Figures taken from the strategic business plan 1999.4 Separate estimates have not been made for the four components of total LRMC.5 Estimate based on average costs and not LRMC.6 Figure excludes LRMC estimate for distribution.7 Treatment and bulk transport costs have been included in resource costs.8 Prices assumed to be in May 2000 price base and converted to November 2001 prices using RPI index.9 Figures given are for the London zone only.10 Resource and treatment costs added together.11 Figure excludes customer service and business activities costs estimated to be 15p/m3.12 Prices assumed to be in September 2000 price base and converted to November 2001 prices using RPI index.13 Figures in November 2001 prices.


65

Table 27 Long run marginal cost estimates - peak demand1

2001-02 pricesResources Treatment Bulk Local Total

transport distribution LRMCp/m3 p/m3 p/m3 p/m3 p/m3

Water and sewerage companiesAnglian:

Anglian2, 3 33 47 63 1 144

Hartlepool4 n/a n/a n/a n/a n/a

D ^wr Cymru2,3,5 n/a n/a n/a n/a 213

Northumbrian:

Northumbrian4 n/a n/a n/a n/a n/a

Essex & Suffolk:

Essex4 n/a n/a n/a n/a n/a

Suffolk4 n/a n/a n/a n/a n/a

Severn Trent10 54 57 95 43 249

South West2 54 468 n/a 302 824

Southern5 n/a n/a n/a n/a 79

Thames4 n/a n/a n/a n/a n/a

United Utilities6 70 58 160 162 450

Wessex6 15 15 86 254 371

Yorkshire:

Yorkshire2,8 25 0 0 2 27

York3,4 n/a n/a n/a n/a n/a

Water only companiesBournemouth & W Hampshire6 58 14 53 2 127

Bristol2,3 14 2 0 0 16

Cambridge2,3 51 4 0 11 67

Dee Valley2,3 10 19 0 25 54

Folkestone & Dover2,3 38 19 106 0 163

Mid Kent2,3,9 0 103 104 0 207

Portsmouth4 n/a n/a n/a n/a n/a

South East:

Northern4 n/a n/a n/a n/a n/a

Southern4 n/a n/a n/a n/a n/a

South Staffordshire4 n/a n/a n/a n/a n/a

Sutton & East Surrey4 n/a n/a n/a n/a n/a

Tendring Hundred2,3 45 7 0 9 60

Three Valleys:

Three Valleys2,3 1 0 177 0 178

North Surrey2,3 35 207 172 4 n/a

Notes:All figures are rounded to the nearest p/m3. The total LRMC figure may not add up due to rounding. n/a=not available1 The LRMC for peak demand is defined as the cost of an increment of load for the purposes of garden watering.2 Prices assumed to be in 1997/98 price base and converted to November 2001 prices using RPI index.3 Figures taken from the strategic business plan 1999.4 Peak LRMC estimates have not been provided.5 Separate estimates have not been provided for the components of total LRMC.6 Prices assumed to be in May 2000 price base and converted to November 2001 prices using RPI index.7 Figure excludes LRMC estimate for distribution.8 Treatment and bulk transport costs included in resource cost.9 Resource and treatment costs added together.10 Figures in November 2001 prices.


66

Tables 26 and 27 show a wide range in the companies’ numbers. This suggestsvariations in the companies’ approaches as well as real differences in costs. Theestimates themselves, therefore, need to be interpreted carefully.

Developments in large user tariffs for 2002-03

Tables 28a, 28b and 28c show large user tariffs for 2002-03. The main developments for2002-03 are set out below:

• The introduction of new intermediate user thresholds by Wessex Water (20 Ml/year),Bournemouth and West Hampshire Water (10 Ml/year), South East Water18 (10 and20 Ml/year), and Three Valleys Water (3 Ml/year).

• The widening of the differential between winter and summer volumetric rates forintermediate users by Severn Trent Water.

• The introduction of new large user thresholds at 150 and 300 Ml/year byBournemouth and West Hampshire Water.

• The introduction of a large user threshold at 50 Ml/year by Northumbrian Water andSouth Staffordshire Water.

• The introduction of subscribed demand tariffs by Anglian Water (joining SouthStaffordshire Water and South East Water).

• The introduction of a new interruptible tariff by Wessex Water (joining Anglian Water,Severn Trent Water and Yorkshire Water).

• The restructuring of reservation charges at United Utilities Water, Yorkshire Water and Bournemouth and West Hampshire Water.

18 Company has not yet introduced a seasonal structure. As an interim measure access to the tariff is restricted tocustomers with a flat demand profile.


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Table 28a Large user tariffs for water 2002-03 - water and sewerage companies

Threshold Fixed Maximum Volumetric charge % billpoint charge demand charge Standard Large user saving for

Ml £/year £/Ml/day p/m3 p/m3 customerWater & sewerage companies using 300MlAnglian

Orange Up to 50 49 67.02 65.65Blue Up to 50 397 67.02 58.68New Industrial Potable – 4,400 19,360 67.02 42.09 243

New Industrial Interruptible – 4,400 17,690 67.02 38.46 303

HartlepoolNew Industrial Potable – 534 10,800 38.23 31.22 73

D ^wr CymruBand 1 50 14,690 88.80 59.46Band 2 100 19,193 88.80 54.96Band 3 250 27,364 88.80 51.69 32Band 4 500 59,302 88.80 45.30Band 5 1,000 79,593 88.80 43.27

Northumbrian:Essex & Suffolk:

EssexBand 1 50 6,190 65.13 53.49Band 2 164 14,710 65.13 48.39 18 Band 3 1,000 14,710 65.13 44.602

SuffolkBand 1 50 8,250 88.44 74.41Band 2 197 19,520 88.44 68.80 15 Band 3 1,000 19,520 88.44 63.282

NorthumbrianBand 1 50 5,876 55.96 44.77Band 2 178 19,700 55.96 37.00 22Band 3 2,500 19,700 55.96 31.412

Severn TrentECO 20 (May - September) 20 1,254.931 77.07 94.71

(October - April) 53.69ECO 50 (May - September) 50 10,430.041,4 77.07 73.80

(October - April) 36.84ECO 250 (May - September) 250 18,770.401,5 77.07 63.24 363

(October - April) 31.56ECO 250* (May - September) 250 18,770.401,5 77.07 57.21 423

plus (October - April) 28.83 South West6

HW1 50 Standard 81.30 69.15 12HW2 100 Standard 81.30 58.81 18HW3 150 Standard 81.30 50.02 19

Southern 100 13,2001 58.60 45.40 15 Thames 50 8,3981 62.21 45.41 22 United Utilities

Middle User 50 5,8001 77.40 65.80Industrial User 194 33,1141 77.40 51.70 19Super User 3,000 33,1141 77.40 38.80

Wessex6

Option 20 20 200 84.61 78.52Option 100 100 200 84.61 55.63Option 150 150 200 84.61 45.04 23Option 20 Managed Demand* 20 900 84.61 73.497

Managed Demand* – 350 84.61 78.43 7 Yorkshire:2,8

YorkshireBand 1 50 Standard 76.20 47.00Band 2 250 Standard 76.20 40.10 33Interruptible Band 1 0 Standard 76.20 73.20Interruptible Band 2 50 Standard 76.20 44.00Interruptible Band 3 250 Standard 76.20 37.10 37

YorkBand 1 50 Standard 50.50 42.80 13Interruptible Band 1 0 Standard 50.50 47.50Interruptible Band 2 50 Standard 50.50 39.80 19

Notes:Percentage bill reductions are based on supplies by a 6” meter.1 Fixed charge is supplementary to the normal standing charge based on meter size.2 This is a falling block tariff. The large user volumetric charge falls at each of the threshold points.3 The percentage bill saving assumes that consumption is spread evenly throughout the year.4 Fixed charge is supplementary to the normal standing charge and reduces by 10p for every m3 supplied over the threshold point until it gets to zero.5 Fixed charge is supplementary to the normal standing charge and reduces by 11.5p for every m3 supplied over the threshold point until it gets to zero.6 Large user volumetric charge applies to all volume after threshold point.7 A lower volumetric rate (79.19 p/m3) applies to all consumption up to 20 Ml/a.8 Yorkshire Water’s large user interruptible tariff is a falling block tariff and is only available to customers using over 250 Ml per annum.* ECO 250 plus tariff of Severn Trent and both Managed Demand tariffs of Wessex Water are interruptible tariffs.


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Table 28b Large user tariffs for water 2002-03 - water only companies

Maximum Volumetric charge % billThreshold Fixed demand saving for

point charge charge Standard Large user customerWater & sewerage companies Ml £/year £/Ml/day p/m3 p/m3 using 300MlBournemouth & West Hampshire1

Band 1 - Jun, Jul, Aug 10 1922 62.00 75.90- other months 54.78

Band 2 - Jun, Jul, Aug 20 7402 62.00 75.90- other months 51.12

Band 3 - Jun, Jul, Aug 50 2,8002 62.00 75.90- other months 45.64



Band 6 - Jun, Jul, Aug 300 25,8002 62.00 75.90 24- other months 26.20

BristolBand D 20 2,940 71.96 57.36Band C 100 6,325 71.96 53.98Band B 250 14,300 71.96 50.79 23 Band A 500 30,800 71.96 47.49Band Super A 750 0 71.96 47.49

Cambridge 150 Standard 57.80 42.50 26 Dee Valley:

Wrexham 250 33,4753 65.76 52.61 3 Folkestone & Dover 100 Standard 78.16 67.35 14 South East:

Mid SouthernInterSaver4 10 56 57.07 55.00

20 456 57.07 53.0050 616 57.07 52.68

Saver 100 4,456 57.07 48.84 12SuperEconomy 50 36,900 57.07 44.33

70 32,500 57.07 44.33100 38,000 57.07 40.26250 32,500 57.07 40.26 14

EastbourneInterSaver4 10 163 100.39 94.82

20 669 100.39 92.2950 2,739 100.39 88.15

Saver 100 2,499 100.39 88.39 11SuperEconomy 50 115,333 100.39 56.79 12

Mid-SussexInterSaver4 10 222 104.92 100.64

20 1,115 104.92 96.1850 3,224 104.92 91.96

Saver 100 3,167 104.92 92.02 11SuperEconomy 50 115,333 104.92 60.42

West KentInterSaver4 10 101 83.85 80.84

20 703 83.85 77.8350 2,950 83.85 73.34

Saver 100 2,496 83.85 73.79 11SuperEconomy 50 115,333 83.85 42.20 12

South StaffordshireMedium User 50 1,000 59.15 57.15Reservation 100 50,139 59.15 28.50

Sutton & East Surrey:Southern Area 250 Standard 76.80 56.69 26

Tendring Hundred1

Band 1 - Jun, Jul, Aug 3 Standard 126.60 164.58Band 1 - other months 113.94Band 2 - Jun, Jul, Aug 25 8,100 126.60 119.34Band 2 - other months 82.62Band 3 - Jun, Jul, Aug 50 16,200 126.60 98.28Band 3 - other months 68.04Band 4 - Jun, Jul, Aug 100 24,300 126.60 87.75 40 Band 4 - other months 60.75

Three Valleys:Mid User 3 standard 57.91 57.07Large User

North Surrey 100 18,4602 57.91 38.71 22Three Valleys 50 9,2302 57.91 38.71 28

Notes:Percentage bill reductions are based on supplies by a 6” meter.1 The percentage bill saving for those companies, with a seasonal element to their large user tariffs, assumes that consumption is spread evenly

throughout the year.2 Fixed charge is supplementary to the normal standing charge based on meter size.3 Dee Valley Water’s fixed charge is based on meter size. For a 75mm meter it is £33,175, increasing by £175 for a 100mm meter and by a further

£125 for 150mm meter.4 To be eligible for the tariff the demand in August of the previous year should be no more than 10% above the average monthly consumption.


69

Table 28c Large user tariffs for sewerage 2002-03 - water and sewerage companies

Volumetric charge % billThreshold Fixed saving for

point charge Standard Large user customerMl £/year p/m3 p/m3 using 300 Ml

Water & sewerage companiesAnglian

Orange Up to 50 97 93.85 90.77 3

Blue Up to 50 195 93.85 88.99 5

New Industrial – 4,300 93.85 81.59 12

D ^wr Cymru 100 Standard 110.35 104.56 5

Severn Trent1,2

Band 1 50 Standard 48.20 47.84

Band 2 250 Standard 48.20 45.51 1

South West3

HS1 50 11,4654,5 162.00 131.40 13

HS2 100 11,4654,5 162.00 122.97 14

Southern 135 32,3004 90.35 67.55 13

Thames 106 10,0004 43.44 33.99 14

Yorkshire1,2

Band 1 50 Standard 72.39 57.19

Band 2 250 Standard 72.39 52.16 19

Notes:Percentage bill reductions are based on supplies by a 6” meter.The sewerage volumetric charges have been standardised to take account of different non-return to sewer assumptions for each company.

1 This is a falling block tariff. The large user volumetric charge falls at each of the threshold points.2 In addition to a standing charge Severn Trent Water and Yorkshire Water apply a site area based banded charge to

recover costs for surface water and highway drainage. The percentage bill saving assumes a site area of 15,500m2.3 Customers pay the standard volumetric charge up to the threshold for the tariff option chosen and then the large

user volumetric rate for that tariff option applies to all volume after the threshold point.4 Fixed charge is supplementary to the normal standing charge based on meter size.5 Fixed charge recovers surface water drainage costs only.


70

Recent developments in our policy on intermediate user tariffs are discussed in chapter 2.Our policy in some of the above areas of development is outlined below.

Seasonal tariffs

Currently only three companies (Bournemouth and West Hampshire Water, TendringHundred Water and Severn Trent Water) have seasonal tariffs for large users.

We suggest that the difference between the peak and off-peak volumetric rates for theseasonal tariff should reflect the absolute difference (p/m

3) between the peak and off-

peak long run marginal costs. But we acknowledge that other approaches may beacceptable.

Subscribed demand tariffs

This type of tariff (which is also known as a capacity reservation tariff) usually comprisesthree main elements.

• An annual reservation charge (£ per year per Ml/d), that is generally based on acustomer’s peak daily demand.

• A reserved volumetric rate (p/m3), which is applied to the volume up to that which the

customer has reserved.

• A penalty volumetric rate (p/m3), which is applied to all volumes taken that are in

excess of the reserved quantity.

Customers have to assess the level of their peak daily demand for the coming year(Ml/d). Because each customer has to reserve capacity at the beginning of the year,customers need to talk to their supplier about likely future demand. Companies say theyhave found this dialogue useful as a means of establishing a constructive discussionabout water use (and the potential for water conservation) with their large users.

Some companies have argued that this type of tariff provides customers with a strongincentive to manage their demands. Current reservation charges are based on thecustomer’s absolute peak daily demand - and not the daily demand that the customerputs on the system during the system peak. This charge will encourage customers tomanage their demands at their own peak periods. But it will not give customers a clearincentive to manage their demands at their company’s system peak.


71

To overcome this problem, reservation charges would need to be higher at the systempeak period. We would prefer a capacity charge that is based on customers’ anticipatedpeak daily demand within the peak summer months. We are developing our policy onsubscribed demand tariffs.

Interruptible tariffs

We recognise the use of interruptible tariffs as a supplementary tool to help companiesmaintain the supply-demand balance. We accept the general principle that reductions incosts associated with interruption should entail an appropriate tariff reduction.

To date, four companies (Severn Trent Water, Yorkshire Water, Anglian Water andWessex Water) have introduced interruptible tariffs but only a handful of customers ineach company have opted for these tariffs. Both Severn Trent Water and Yorkshire Wateroffer it to customers using not less 250 Ml/year on a medium-term (24 hours) basis.Anglian Water offers it on a short-term (4 hours) basis to customers on the NewIndustrial Interruptible tariff. Wessex Water has also introduced a short-term interruptibletariff (4 hours) for its intermediate users.

We have agreed operating rules with these companies to ensure that interruptiblecustomers are capable of managing supply interruptions. For example, we require thatcompanies conduct at least one test interruption per customer per year. Other companiesconsidering introducing such tariffs should refer to the appropriate charges schemes.However, at the current time customer interest appears extremely limited.

Reservation/stand-by charges

Customers who have access to another supply (eg a bore hole or effluent treatmentplant on-site) may only require back-up from the incumbent for potential outage in theirown water resource/treatment systems. These customers have particular costcharacteristics and, as a distinct customer class, may require a dedicated suite ofreservation/stand-by charges.

We view reservation charges and stand-by charges as being synonymous. The customer “reserves” system capacity that can be used at any time during the year and the company is on “stand-by” to supply the service required by that customer.


72

Six companies have introduced reservation charges (United Utilities Water, Severn TrentWater, Yorkshire Water, Bournemouth and West Hampshire Water, Folkestone Water19,and Three Valleys Water). These are shown in table 29. United Utilities Water has alsointroduced a reservation charge for trade effluent customers who pre-treat their effluentsbut require back-up treatment at the local sewage works.

Table 29 Non-household reservation charges for water 2002-03

Threshold Volumetricmeter size volume Reservation rate

All companies (mm) (Ml) charge p/m3

Bournemouth & West Hampshire1

Reserved capacity charge2,3,4

Band 1 - Jun, Jul, Aug 20 £40,740 per Ml/day 73.82

- other months " 34.46

Band 2 - Jun, Jul, Aug 54 " 73.82


Band 3 - Jun, Jul, Aug 108 " 73.82


Folkestone & Dover by special agreement

Severn Trent

Band 1 50 £2,186.04 per year 77.07

Band 2 80 £7,976.88 per year 77.07

Band 3 100 £13,294.44 per year 77.07

Band 4 150 £31,975.32 per year 77.07

Three Valleys

Band 1 100 £12,000 per year 57.91

Band 2 150 £22,290 per year 57.91

United Utilities

Band 1 0 £3,465 per year 77.40

Band 2 50 £9,241 per year 77.40

Band 3 80 £13,861 per year 77.40

Band 4 100 £34,652 per year 77.40

Yorkshire2,5

Band 1 0 £0.22 per m3 53.50

Band 2 50 £0.22 per m3 24.30

Band 3 250 £0.22 per m3 17.40

Notes:1 Charges are additional to normal standing charge based on meter size.2 Customers have to reserve their annual demand in advance, at the beginning of the year.3 Higher seasonal volumetric rates apply to all consumption above reserved quantity.4 Reserve capacity charge is discounted at the rate of 1/365 per day if reserved capacity is not called upon during the 92 day peak

period from June to August inclusive.5 Normal large user volumetric rates apply to all consumption above reserved quantity.

19 Reservation charge is levied via a special agreement


73

Three types of reservation charge are currently applied in England and Wales:

• via a standing charge20 related to meter size (£/year);• via a volumetric rate (p/m3) that is applied to the agreed annual demand for water;

and• via a specific reservation charge (£/Ml/d) based on a maximum daily take.

For Severn Trent Water, United Utilities Water and Three Valleys Water, reservationcharges vary according to meter size. Yorkshire Water also originally had meter basedreservation charges. In 2002-03 it changed to volume based charges.

Bournemouth and West Hampshire Water has introduced two types of reservationcharge – a reserved capacity charge (ie for customers who require a supplier of lastresort) and a surplus capacity charge (for customers with over sized meters who haveunpredictable demands). The reserved capacity charge is structured like a subscribeddemand tariff.

We are developing our policy on reservation charges.

Non-potable water

Some companies have a tariff for the supply of non-potable water to industrialcustomers. These are shown in table 30.

Table 30 Comparison of non-potable volumetric charges with standard and large userpotable volumetric charges 2002-03

Standard Large user1

Non-potable potable potableCompany p/m3 p/m3 p/m3

Anglian:

Orange 59.08 67.02 65.65

Blue 52.81 67.02 58.68

New Industrial2 37.88 67.02 42.09

New Industrial Plus2 24.60 67.02 –

Dee Valley (Wrexham area) 41.35 65.76 52.61

D ^wr Cymru3 52.88 88.80 51.69

Northumbrian4 13.52 55.96

United Utilities5 27.60 77.40 51.70

Sutton & East Surrey (Southern area) 51.20 76.80 56.69

Notes:1 Dee Valley Water and Sutton and East Surrey Water large user potable volumetric charges apply to water supplies of at least 250,000 m3/year.

Customers of other companies must assess their most beneficial option.2 In addition to the volumetric rate, potable water customers pay a maximum daily demand charge of £19.36 per m3 and non-potable customers pay a

maximum daily demand charge of £17.43 per m3.3 The large user potable volumetric charge shown for D ^wr Cymru is beneficial for customers using over 250,000 m3/year.4 Charges apply to supply of partially treated water from Teesside industrial raw water system. In addition to volumetric rate customers receiving

partially treated water pay an annual site charge of £7,790.5 The large user potable volumetric charge shown for United Utilities Water is beneficial for customers using over 194,000 m3/year.

20 The standing charge can be viewed as a form of fixed reservation charge where the maximum daily demand iseffectively determined by the size of the meter.


74

We accept that the volumetric charge will be lower than that for a comparable potablesupply because it does not include the cost of treatment. We believe, however, thatcharges for non-potable water should still be set with reference to the LRMC of supply.

Sewerage and trade effluent

The principles that companies should apply when setting large user tariffs for watershould also apply when a company sets any large user tariff for sewerage or tradeeffluent.

It is likely, therefore, that a reduced charge for large users would be based on acustomer making less use of the reception and conveyance part of the service. This isconsistent with the way large user tariffs for water have developed. In structuring thetariff, companies should refer to the long run marginal cost of collecting and treatingsewage/effluent, as outlined in chapter 5.

Special agreements and bulk supplies

Many companies have arrangements with particular customers where typically thecustomer pays a non-standard charge to reflect their individual circumstances. Forexample, the customer may have made an initial capital contribution to the company.

These non-standard charges are commonly known as special agreements and, although they are outside the tariff basket, those agreed or renewed since 1989 aresubject to Condition E (which ensures that there is no undue preference or unduediscrimination). The Competition Act 1998 applies to all special agreements regardless of when they were agreed.

To aid transparency, each April we place details (excluding the customer’s name) ofspecial agreements on a register in our library. The register also contains details of bulksupply agreements between companies and is updated each October.


75

7. Other charges

Connection charges

Customers pay a connection charge to cover the direct costs of work and materialsrequired to connect a property to a company’s water main or sewer. Companies willgenerally permit customers to make the connection to the sewer themselves. If acompany insists on doing the work, we can determine a reasonable connection charge.So far, we have received only eleven complaints about sewer connection charges.

Most companies insist, however, on making the physical connection to the water main,although customers may be allowed to do some of the preparation, such as the trenchwork. A few companies allow developers to make connections in accordance withappropriate standards.

We have powers to settle disputes between customers and companies about charges for connections to the water supply. We have decided 288 cases to date. During 2001-02, we made 21 determinations. In 17 of these, companies were found to havecharged excessively.

At our request, companies have reviewed their connection charges and these now moreproperly reflect costs. As a result, we have received fewer requests for determinationsthis year.

We will continue to use our powers under the Water Industry Act 1991 to considerindividual complaints about the cost of specific connections made by the undertakers.We may also use powers under the Competition Act 1998 to judge whether anundertaker may have abused its dominant position by acting anti-competitively.

In March 2002, after consultation, we published guidance to water companies,‘Competition in providing new water mains and service pipes’, about their policies forallowing developers to lay new water mains and service pipes. This sets out theprinciples water companies should use as a framework for their own procedures on self-lay. It also says which aspects of the work should be open to competition and theareas water companies can retain responsibility for at the moment.


76

Infrastructure charges

Companies can make infrastructure charges for the first-time connection of premises fordomestic purposes to a public water main or to a public sewer. We set an upper limit onthis charge. At the 1999 periodic review, the maximum infrastructure charge was set at£229.45 for each service for 2000-01, to be indexed subsequently each year in line withinflation. For 2002-03, the maximum charge is set at £238.95.

Where a supply is provided by a single, larger (non-standard) service pipe, for example a hotel or block of flats where a management company is responsible for water charges,the infrastructure charges are calculated by reference to the number and type of waterfittings.

Miscellaneous charges

Many companies include a number of non-standard charges within their approvedcharges schemes. These ‘miscellaneous charges’ cover a variety of services whichcompanies may provide as a water undertaker, but which are not included within thetariff basket. Examples include charges for voluntary disconnection and reconnection,non-domestic meter installations, hydrant installation and standpipe hire.

While we have not formally investigated these charges we have a monitoring role toensure that these charges are broadly cost reflective. We will consider challenging acompany if a complaint is received.

Other charges

Several companies have charges for swimming pools and the use of hosepipes andsprinklers where a customer receives an unmeasured supply. These are set out in table 31. Three Valleys Water is no longer applying a hosepipe charge for customers in its North Surrey charging area.


77

Table 31 Hosepipe, sprinkler and swimming pool charges 2002-03 £/year


78

Ho

sep

ipes

Sp

rin

kler

Sw

imm

ing

po

ol c

har

ges

Gen

eral

Gen

eral

Allo

tmen

tG

ener

alC

ircu

lati

ng

No

n-c

ircu

lati

ng

Gen

eral

9-45

m3

46-9

0m3

<20m

320

-90m

3>9

0m3

9-45

m3

46-9

0m3

>10m

3

(2,0

00 -

10,0

00g)

(10,

001

- 20,

000g

)(4

,339

g)(4

,339

- 19

,797

g)(1

9,79

7g)

(2,0

00 -

10,0

00g)

(10,

001

- 20,

000g

)(>

2,20

0g)

Wat

er &

sew

erag

e

com

pani

es

North

umbr

ian:

Esse

x &

Suf

folk

32.5

075

.50

Sout

hern

37.0

065

.00

Tham

es47

.50

Wes

sex

73.0

0

Wat

er o

nly

com

pani

es

Bour

nem

outh

&

W H

amps

hire

29.4

0

Bris

tol

50.0

0

Chol

derto

n73

.00

Folk

esto

ne &

Dov

er35

.70

55.4

8

Mid

Ken

t37

.00

74.0

0

Sout

h Ea

st84

.00

Sout

h St

affo

rdsh

ire40

.35

Sutto

n &

Eas

t Sur

rey

8.00

16.0

032

.00

64.0

0

Tend

ring

Hund

red

28.0

0

Thre

e Va

lleys

:

North

Sur

rey

40.0

0

Thre

e Va

lleys

40.0

040

.00

Annexes

Table A1 Price limits for 2000-01 to 2004-05

Annual price limits2000-011 2001-02 2002-03 2003-04 2004-05

Water & sewerage companiesAnglian2 -10.0 1.0 2.2 2.5 2.5

D ^wr Cymru3 -10.5 0.2 0.7 2.0 1.8

Northumbrian4: -18.0 -1.5 0.0 0.0 0.0

Northumbrian -19.4 -2.0 0.0 0.0 0.0

Essex & Suffolk -13.8 0.0 0.0 0.0 0.0

Severn Trent -14.1 -1.0 -1.0 0.0 1.0

South West5 -12.2 0.0 4.4 4.4 4.4

Southern -13.0 0.0 0.0 1.6 0.8

Thames -11.7 0.0 0.0 -0.8 0.0

United Utilities -9.3 -1.0 0.0 4.0 4.5

Wessex -12.0 0.0 0.0 3.8 4.7

Yorkshire6: -14.4 0.0 0.0 0.0 0.7

Yorkshire -14.5 0.0 0.0 0.0 1.0

York -9.0 -1.0 0.0 0.0 0.0

WaSC average (weighted) -12.3 -0.3 0.3 1.4 1.9


Bournemouth & W Hampshire5 -3.0 -1.7 0.4 0.4 0.5

Bristol -10.0 1.0 1.0 0.0 -1.9

Cambridge -14.3 0.0 -1.2 -0.4 -0.9

Cholderton -8.0 -5.0 0.0 0.0 0.0

Dee Valley5 -10.6 -2.6 -0.5 -0.5 -0.5

Folkestone & Dover 0.0 1.0 3.0 3.0 3.2

Mid Kent7 -19.7 4.5 3.2 0.0 0.0

Portsmouth -3.0 -1.2 -1.3 -0.5 -1.0

South East -16.1 -1.0 -1.5 0.0 0.0

South Staffordshire -2.7 -1.0 -1.0 -1.0 -1.0

Sutton & East Surrey7 -17.0 3.8 2.1 0.0 0.0

Tendring Hundred3 -6.9 3.5 3.6 3.7 3.7

Three Valleys8: -15.2 0.0 0.0 0.4 0.4

Three Valleys -15.2 0.0 0.0 0.0 0.0

North Surrey -15.0 0.0 0.0 2.0 2.2

WoC average (weighted) -12.4 0.2 0.1 0.1 -0.1

Industry average (weighted) -12.3 -0.3 0.3 1.3 1.7

Notes:1 For 2000-01, any unused K was taken into account when Ofwat set price limits in November 1999.2 Anglian Water merged with Hartlepool Water in 1998. As such there are no price limits for Hartlepool Water but those for Anglian Water apply.3 The price limits for D ^wr Cymru and Tendring Hundred Water reflect Ofwat's interim determination published in December 2000.4 Northumbrian Water and Essex & Suffolk Water have merged. A combined licence came into effect on 1 April 2000. This set out the combined price limits for the merged

company. The companies are required to comply with the separate price limits set in November 1999 for the two areas in addition to the combined price limits set out in thelicence amendment.

5 Price limits for South West Water, Bournemouth and West Hampshire Water and Dee Valley Water were revised via an interim determination in December 2001.6 Yorkshire Water and York Waterworks announced a merger in 1999 and a combined licence came into effect on 1 April 2000. The combined licence sets out the price limits

for the merged company. However, as part of the terms of the merger, the price limits for York Waterworks were set as if they were a separate company and York Waterwork'scustomers will benefit from a further 15% reduction in addition to the 2004-05 price limit.

7 The price limits for Mid Kent Water and Sutton & East Surrey Water reflect the Competition Commission's redetermination in August 2000 of the price limits set by Ofwat inNovember 1999.

8 Three Valleys Water and North Surrey Water have merged. A combined licence came into effect on 1 October 2000. This set out the combined price limits for the mergedcompany.


79

Table A2 Indicative changes in water and sewerage charges 2000-01 to 2004-05

2000-01 2001-02 2002-03 2003-04 2004-05Water Sewerage Water Sewerage Water Sewerage Water Sewerage Water Sewerage

% % % % % % % % % %

Anglian -11.2 -9.2 0.8 1.1 2.0 2.3 2.3 2.6 2.3 2.6

D ^wr Cymru1 -5.2 -14.9 -1.7 2.0 -1.3 2.5 0.0 3.8 -0.3 3.5

Northumbrian -12.3 -24.0 -2.5 -1.5 -0.6 0.4 -0.6 0.4 -0.6 0.4

Severn Trent -7.5 -19.7 -1.2 -0.8 -1.2 -0.8 -0.2 0.2 0.8 1.2

South West2 -3.8 -17.3 -1.1 0.8 3.4 5.1 3.4 5.1 3.4 5.1

Southern -19.2 -10.5 -2.3 0.8 -2.3 0.8 -0.8 2.4 -1.6 1.6

Thames -7.6 -14.6 0.5 -0.4 0.5 -0.4 -0.3 -1.2 0.5 -0.4

United Utilities 0.5 -15.8 0.5 -2.1 1.5 -1.2 5.5 2.8 6.0 3.3

Wessex -13.9 -11.1 -0.1 0.0 -0.1 0.0 3.7 3.8 4.6 4.7

Yorkshire -15.2 -13.9 0.2 -0.2 0.2 -0.2 0.2 -0.2 1.2 0.8

Notes:

1 The indicative price limits for D ^wr Cymru from 2001-02 have been updated following Ofwat's interimdetermination of K published in December 2000.

2 The indicative price limits for South West Water from 2002-03 have been updated following Ofwat's interimdetermination of K published in December 2001.


80

Annex A3

The tariff basket formulaThis annex explains the tariff basket formula, which we use to calculate the weightedaverage annual increase in each company’s charges. This weighted average chargesIncrease (WACI) must not exceed a company’s overall charges limit, RPI+K+U, asexplained in chapter one.

The formula as it appears in water companies’ licences

The formula is stated, as follows, in Condition B, paragraph 2, of companies’ Licences.

‘Weighted Average Charges Increase’ means the sum calculated as follows:

Wt = ∑ i ( ) + ∑ j ( ) –1

where

Wt is the Weighted Average Charges Increase for the Charging Year

i identifies the two Unmeasured Basket Items (one for water only companies)

j identifies the three Measured Basket Items (one for water only companies)

∑ i requires summation over the Unmeasured Basket Item(s)

∑ j requires summation over the Measured Basket Item(s)

At(i) is the Average Charge Per Chargeable Supply in respect of UnmeasuredBasket Item i for the Charging Year

At-1(i) is the Average Charge Per Chargeable Supply in respect of UnmeasuredBasket Item i for the Prior Year

Bt(j) is the Weighting Year Revenue in respect of Measured Basket Item j for theCharging Year

Bt-1(j) is the Weighting Year Revenue in respect of Measured Basket Item j for thePrior Year

r(i) or r(j) is the revenue (exclusive of VAT) which accrued to the Appointee in theWeighting Year from all Standard Charges other than Excluded Charges inrespect of Unmeasured Basket Item i or Measured Basket Item j (as the casemay be), divided by the aggregate of such revenues for all five Basket Items(two for water only companies). In the case of Measured Basket Item(s),standard charges include non volumetric charges, eg standing charges.


81

At(i) . r(i)

At-1(i)

Bt(j) . r(j)

Bt-1(j)

In order to interpret this formula, the following definitions are required.

From Condition A, paragraph 3:

“Charging Year” means a year commencing on 1 April.

“Prior Year” means the year commencing 1 April immediately prior to the relevantCharging Year.

From Condition B, paragraph 2:

“Basket Items” are:

(1) unmeasured water supply;

(2) unmeasured sewerage services;

(3) measured water supply;

(4) measured sewerage services; and

(5) reception, treatment and disposal of trade effluent

where

(a) a measured supply or service is one where all or some of the charges for thatsupply or service are based on measured quantities of volume and anunmeasured supply or service is any other; and

(b) sewerage services includes sewage treatment and disposal and excludesreception, treatment and disposal of trade effluent.

“Unmeasured Basket Items” means items (1) and (2) in the definition of BasketItems.

“Measured Basket Items” means items (3), (4) and (5) in the definition of BasketItems.

“Average Charge Per Chargeable Supply” means in respect of a specifiedUnmeasured Basket Item for a specified year, the amount R/N, where

R is the annual revenue (exclusive of VAT) which would accrue to theAppointee in respect of the specified Unmeasured Basket Item if all StandardCharges (other than Excluded Charges) made or to be made in respect of thatUnmeasured Basket Item in the specified year were applied to all ChargeableSupplies of the Appointee which would have been subject to those StandardCharges as at 1 December preceding the specified year; and


82

N is the number of Chargeable Supplies as at such 1 December for which theAppointee would have been entitled to make those Standard Charges.

“Weighting Year Revenue” means the revenue (exclusive of VAT) which would haveaccrued to the Appointee in the Weighting Year in respect of the specifiedMeasured Basket Item, if all Standard Charges (including any non volumetriccharge, eg standing charges) other than Excluded Charges made or to be made inrespect of that Measured Basket Item in the Charging Year or, as the case may be,the Prior Year had applied.

“Weighting Year” means the financial year of the Appointee ended last before 7 October in the Prior Year.

The charging year definition applies equally to Portsmouth Water with its July toJune billing year, using averages of tariffs etc for the charging year.

How the tariff basket formula worksThe tariff basket formula incorporates five separate calculations of the annual increasefor each of the five basket items (two for water only companies):

• Unmeasured Water

• Unmeasured Sewerage

• Measured Water

• Measured Sewerage

• Trade Effluent

The increase for the unmeasured and the measured basket items are carried out indifferent ways. A weighted average of the increases is then calculated. It is thisweighted average increase that must not exceed RPI + K + U.

RPI refers to the percentage increase in the Retail Price Index in the year to theNovember before the charging year that begins on 1 April. K is the price limit Ofwat setfor each company, for each year. U is any amount of K not taken up in previous years.

The increase in respect of unmeasured services is the increase from one year to thenext of the average charge for that unmeasured service (shown in the formula as theincrease in “A(i)” for one year over the previous year). The average charge is the totalrevenue of all charges for the particular unmeasured service, divided by the number of


83

customers (strictly, the number of Chargeable Supplies). However, in calculating therevenue relating to the supply, it is the revenue that would be generated if the company’scustomers for that service as at the preceding 1 December were customers in respect ofthat service throughout the year in question.

The increase in respect of measured services is the increase from one year to the nextof the revenue for that measured service (shown in the formula as the increase in “B(j)”for one year over the previous year). The revenue for the charging and prior year iscalculated as the revenue that would have accrued if the proposed charges for the yearin question had been applied to the consumption of services by customers of theparticular measured service two years earlier than the charging year.

These increases are then weighted by the revenue (ie the “r(i)” and “r(j)” in the formula)for each basket item. So for measured water, for example, the weighting “r(measuredwater)” is the proportion that revenue from measured water services in the year bears to the total revenue in the year from all the basket items. For this calculation, the revenueto be used is the revenue from two years earlier than the charging year. This is the lastcomplete accounting year for which revenue data is known when prices are set in oraround January for a charging year beginning on 1 April.

Consequences of the tariff basket formulaBecause of the way the tariff basket formula was constructed in the companies’ licences,we expect that, in any given year, the increases in unmeasured bills and in measuredprices are unlikely to be equal to the percentage RPI +K. In some cases, the differencescan be quite substantial. Below is a list of reasons for such discrepancies that affectdifferent companies in different ways.

• When an unmeasured customer is metered, the difference between the customer’sunmeasured bill and the average unmeasured bill can be offset by altering chargesto the remaining unmeasured properties, (ie unmeasured charges fall or rise inorder to maintain a constant average charge per chargeable supply depending onwhether the unmeasured bill of the newly metered customer was above or belowaverage). The maintenance of a constant average charge per chargeable supplymeans that for every household that switches to a meter, revenue from unmeasuredcustomers is reduced by an average unmeasured bill irrespective of the rateablevalue of the property metered. If, for example the customer who switches previouslyhad a higher than average bill, other unmeasured charges can rise to maintain aconstant average charge per chargeable supply.


84

• In addition, if the volume of water consumed by the newly metered customer (ie that recorded on the meter after he is metered) gives a bill higher than theaverage unmeasured household bill by which unmeasured revenue was reduced,total revenues will (other things being equal) increase by more than K. On the otherhand if the volume of water consumed gives a lower than average bill totalrevenues will increase by less than K.

• The level of the tariff differential (ie the difference between a measured bill for theforecast average water delivered to unmeasured households and the averageunmeasured household bill) is also important. The higher this is, the more revenuecan be derived from the property being metered, ie revenues and average billscould rise by more than K.

• A company may have no customers switching to a meter, but will have newconnections. Depending on the level of consumption, the tariff differential andwhether these properties are in fact metered, average bills and revenues canchange by an amount different to K.

• If future volumes of measured water sold are forecast to decline and the drop inrevenue is greater than the reduction in costs, then compensation in K may berequired in order to maintain revenues. Hence, changes in volumes may account for differences between K and changes in revenues and bills (the converse will also apply).

The following pages show a worked example of the tariff basket arithmetic. In practiceany one company’s tariff basket will have a larger number of individual tariffs in eachbasket item than shown in this example.

The first page shows the calculations for unmeasured water and unmeasured seweragebaskets; the second page covers the measured water and measured sewerage baskets;the third shows the trade effluent basket and the final page shows how the overallweighted average charges increase is calculated.


85


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Table B1 Water Customers 2002-03

(Thousands of customers) (Percentage)Unmeasured supplies Metered supplies Proportion metered

Households Non- Households Non- Households Non-households households households

Water & sewerage companiesAnglian 847.7 6.5 863.5 105.3 50.5 94.2

D ^wr Cymru 987.1 13.8 172.8 84.7 14.9 86.0

Northumbrian:

Northumbrian 930.4 17.0 79.5 44.1 7.9 72.2

Essex & Suffolk 469.5 4.1 212.4 37.9 31.1 90.2

Severn Trent 2,317.0 12.0 648.0 212.0 21.9 94.6

South West 398.9 5.8 235.8 65.5 37.2 91.9

Southern 695.6 15.1 219.7 50.9 24.0 77.2

Thames 2,551.1 24.9 600.5 186.2 19.1 88.2

United Utilities 2,368.6 21.5 368.7 183.9 13.5 89.5

Wessex 324.5 7.9 141.8 45.3 30.4 85.2

Yorkshire:

Yorkshire 1,349.6 20.8 445.4 112.9 24.8 84.5

York 68.3 0.6 5.6 4.3 7.6 87.6

WaSC total 13,308.1 150.0 3,993.7 1,133.0 23.1 88.3


Bournemouth & W Hampshire 127.7 1.2 41.9 13.6 24.7 91.9

Bristol 344.4 8.3 91.2 33.6 20.9 80.1

Cambridge 51.8 1.0 56.3 8.8 52.1 89.4

Cholderton 0.6 0.0 0.1 0.0 10.9 76.5

Dee Valley 74.1 0.9 28.7 7.4 27.9 88.9

Folkestone & Dover 41.5 0.8 22.9 4.2 35.6 83.6

Mid Kent 151.6 1.8 61.9 18.9 29.0 91.2

Portsmouth 259.0 2.7 8.9 14.9 3.3 84.6

South East 386.7 7.8 148.7 32.9 27.8 80.9

South Staffordshire 429.5 6.1 65.5 26.3 13.2 81.2

Sutton & East Surrey 203.0 2.8 44.8 13.3 18.1 82.5

Tendring Hundred 29.4 0.1 34.0 4.8 53.7 98.0

Three Valleys:

Three Valleys 774.2 9.7 184.6 46.0 19.3 82.5

North Surrey 149.0 1.7 34.5 9.2 18.8 84.1

WoC total 3,022.5 45.1 824.1 233.9 21.4 83.8

Industry total 16,330.5 195.0 4,817.8 1,366.9 22.8 87.5

Notes:

Figures are company estimates of customers served in 2002-03.

The totals may not add up due to rounding.


90

Table B2 Sewerage customers 2002-03

Thousands of customers (Percentage)Unmeasured supplies Metered supplies Proportion metered

Water & sewerage Households Non- Households Non- Households Non-

companies households households households

Anglian 1,127.2 9.0 1,112.6 104.3 49.7 92.1

Dwr Cymru 1,017.9 11.7 184.8 59.5 15.4 83.6

Northumbrian 965.9 30.3 78.9 42.3 7.6 58.3

Severn Trent 2,646.0 18.0 687.0 238.0 20.6 93.0

South West 358.0 5.9 224.7 40.0 38.6 87.2

Southern 1,283.4 24.1 357.9 71.0 21.8 74.6

Thames 3,982.8 46.6 908.0 244.8 18.6 84.0

United Utilities 2,350.2 21.2 359.8 153.6 13.3 87.9

Wessex 728.6 14.6 227.9 73.0 23.8 83.3

Yorkshire 1,438.4 24.4 456.7 96.7 24.1 79.8

Industry total 15,898.5 205.8 4,598.2 1,123.3 22.4 84.5

Notes:

Figures are company estimates of customers served in 2002-03.



91

Table B3 Population receiving water services 2002-03

Thousands of population

Water & sewerage companies Unmeasured supplies Measured supplies

Anglian 2,260 2,049

Dwr Cymru 2,581 283

Northumbrian:

Northumbrian 2,344 198

Essex & Suffolk 1,299 416

Severn Trent 6,091 1,335

South West 1,064 493

Southern 1,765 462

Thames 6,391 1,550

United Utilities 6,021 866

Wessex 893 308

Yorkshire:

Yorkshire 3,442 1,103

York 164 21

WaSC total 34,315 9,084

Water only companiesBournemouth & W Hampshire 322 111

Bristol 866 216

Cambridge 155 140

Cholderton 2 0

Dee Valley 193 64

Folkestone & Dover 114 50

Mid Kent 407 168

Portsmouth 629 30

South East 1,040 393

South Staffordshire 1,088 144

Sutton & East Surrey 528 118

Tendring Hundred 79 69

Three Valleys 2,491 464

WoC total 7,913 1,967

Industry total 42,228 11,051

Note:

Figures are company estimates of population served in 2002-03.



92

Table B4 Population receiving sewerage services 2002-03

Thousands of population

Water & sewerage companies Unmeasured supplies Measured supplies

Anglian 3,008 2,655

Dwr Cymru 2,668 319

Northumbrian 2,384 210


South West 963 450

Southern 3,180 842

Thames 10,138 2,355

United Utilities 6,034 837

Wessex 1,979 501

Yorkshire 3,669 1,128

Industry total 40,922 10,711

Note:

Figures are company estimates of population served in 2002-03.



93

Table B5 Area served 2002-03

km2

Water SewerageWater & sewerage companies

Anglian 22,090 27,500

Dwr Cymru 20,400 21,300

Northumbrian:

Northumbrian 8,993 9,400

Essex & Suffolk 2,850 –


South West 10,300 10,800

Southern 4,450 10,450

Thames 8,200 13,750

United Utilities 14,415 14,445

Wessex 7,350 10,000

Yorkshire:

Yorkshire 13,900 13,600

York 340 –

WaSC total 133,033 152,895

Water only companiesBournemouth & W Hampshire 1,041

Bristol 2,391

Cambridge 1,175

Cholderton 25

Dee Valley 831

Folkestone & Dover 420

Mid Kent 2,050

Portsmouth 868

South East 3,607

South Staffordshire 1,507

Sutton & East Surrey 833

Tendring Hundred 352

Three Valleys:

Three Valleys 3,213

North Surrey 500

WoC total 18,813

Industry total 151,846

Note:

Figures are based on company estimates of area served in 2002-03.



94

Table C1 Water rateable value charges 1995-96 to 2002-03 – household customers takingunmeasured supplies

p/£RV1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03


Anglian 50.69 50.69 50.69 49.98 47.58 38.73 38.09 36.78Hartlepool1 – – – – – – –

Dwr Cymru 38.72 39.20 40.05 39.67 41.97 39.55 39.87 39.66 Northumbrian:

Essex & Suffolk:Essex 33.02 36.20 38.26 41.11 43.23 36.75 38.34 39.46Suffolk 58.10 63.62 66.98 71.96 75.64 64.59 67.41 69.38

Northumbrian: 32.08 26.00 26.25 27.00Northumbrian 27.15 29.27 30.93 33.83North East 41.07 39.52 37.15 36.30

Severn Trent:Zone 1 45.85 47.90 52.75 57.69 64.68 62.40 64.38 64.27Zone 2 41.29 43.13 47.50 51.93 58.22 56.18 57.96 57.87Zone 3 40.04 41.83 46.06 50.37 56.47 54.49 56.21 56.11Zone 4 41.81 43.68 48.10 52.61 59.00 56.92 58.72 58.63Zone 5 48.08 50.22 55.30 60.49 67.83 65.44 67.51 67.40Zone 6 50.02 52.25 57.54 62.92 70.56 68.08 70.23 70.12Zone 7 50.38 52.63 57.95 63.37 71.06 68.57 70.73 70.60Zone 8 40.04 41.83 46.06 50.37 56.47 54.49 56.21 56.11

South West 49.43 50.90 52.58 50.64 48.67 45.54 48.06 50.71 Southern 33.70 36.30 38.50 40.30 43.40 34.90 35.30 35.00 Thames:

Area 1 25.41 26.72 28.64 31.03 33.20 31.84 33.69 34.40Area 2 25.85 27.18 29.14 31.58 33.79 32.40 34.28 35.01Area 3 19.45 20.45 21.92 23.75 25.41 24.37 25.78 26.33Area 4 23.29 24.49 26.25 28.44 30.43 29.18 30.87 31.52Area 5 29.90 31.44 33.70 36.52 39.07 37.47 39.64 40.48Area 6 25.90 27.23 29.19 31.63 33.84 32.45 34.38 35.11Area 7 35.63 37.46 40.16 43.52 46.56 44.65 47.24 48.24

United Utilities 35.20 37.80 39.30 40.00 41.20 41.80 43.80 44.90 Wessex 45.45 52.65 58.60 65.28 70.39 60.75 62.51 63.73 Yorkshire:

Yorkshire 56.60 59.90 62.00 66.90 71.40 63.00 65.90 67.00York 40.78 42.05 43.50 45.10 46.65 43.70 45.00 45.70

Water only companiesBournemouth & W Hampshire: 30.73 33.00 35.70 37.67 37.82 38.54 39.37

Bournemouth 30.00West Hampshire 25.34

Bristol 41.30 43.70 46.70 49.25 52.40 47.60 49.85 50.70 Cambridge 32.00 34.70 35.60 38.40 39.10 34.98 36.00 35.72 Cholderton 45.57 46.00 47.10 50.00 53.40 50.50 48.80 49.40 Dee Valley:

Chester 38.88 40.27 41.61 42.42 43.48 39.21 39.52 39.73Wrexham 43.85 44.50 45.00 45.80 46.42 41.87 42.20 42.41

Folkestone & Dover 45.41 48.40 50.08 53.68 56.30 57.69 60.73 64.64 Mid Kent 51.42 54.70 58.01 60.87 63.30 43.25 46.77 48.80 Portsmouth2 18.50 18.90 19.10 19.60 20.20 21.90 23.80 24.00 South East:

Mid Southern 34.55 36.12 37.45 38.85 41.72 33.74 34.80 35.65South East:

Eastbourne 58.46 62.81 64.92 67.62 71.39 58.37 60.16 61.64Mid-Sussex 62.42 66.88 69.10 71.96 75.81 62.00 64.05 65.62West Kent 53.62 58.32 60.37 62.90 66.64 54.31 56.11 57.49

South Staffordshire 34.35 35.85 37.34 38.64 40.07 39.85 41.20 41.20 Sutton & East Surrey:

Northern Area1 – – – – – – –Northern Area (Croydon) 41.40 40.55 39.00 38.50 26.91 23.85 25.57 25.85Southern Area 41.40 42.68 43.25 45.29 45.99 40.75 43.70 44.21

Tendring Hundred 54.63 58.14 61.75 66.90 69.12 65.61 72.09 76.60 Three Valleys:

North Surrey 25.30 27.67 30.05 32.45 34.80 31.00 32.45 33.20Three Valleys:

Colne Valley 24.22 25.80 27.50 29.65 32.16 27.74 29.02 29.68Lee Valley 29.75 31.69 33.78 36.41 39.49 34.07 35.65 36.46Rickmansworth 23.54 25.08 26.73 28.82 31.26 26.97 28.22 28.87

Industry average (weighted) 36.75 38.62 40.37 42.79 45.09 41.35 42.87 43.40

Notes:1 Licence fees are levied in the Hartlepool area of Anglian Water and in the Northern area (excluding the Croydon area) of Sutton and

East Surrey Water.2 These charges apply from 1 July.


95

Table C2 Sewerage rateable value charges 1995-96 to 2002-03 – household customerstaking unmeasured supplies

p/£RV1995-96 1996-97 1997-98 1998-991999-2000 2000-01 2001-02 2002-03


Anglian 53.75 56.71 59.50 61.80 61.04 49.99 49.60 48.07

Dwr Cymru 38.93 41.31 43.11 47.07 52.28 41.50 44.49 46.07

Northumbrian 33.87 36.42 37.98 40.07 43.95 28.37 29.45 30.49

Severn Trent:

Zone 1 57.53 61.57 61.21 64.30 65.48 53.06 54.86 54.99

Zone 2 48.50 51.91 51.61 54.17 55.17 44.70 46.21 46.31

Zone 3 51.03 54.61 54.30 57.04 58.09 47.07 48.67 48.78

Zone 4 55.34 59.23 58.89 61.87 63.01 51.05 52.78 52.90

Zone 5 64.56 69.09 68.69 72.17 73.50 59.56 61.58 61.72

Zone 6 62.56 66.96 66.57 69.92 71.21 57.70 59.65 59.78

Zone 7 60.95 65.24 64.86 68.12 69.37 56.21 58.13 58.25

Zone 8 50.66 54.23 53.92 56.64 57.67 46.73 48.32 48.43

South West 91.34 96.46 103.42 114.98 128.73 112.35 119.67 126.73

Southern 45.40 48.80 52.60 56.30 61.10 56.80 60.40 61.30

Thames:

Area 1 23.59 24.85 25.45 26.65 27.83 24.10 24.87 25.12

Area 2 24.45 25.76 26.38 27.63 28.85 24.98 25.78 26.04

Area 3 15.35 16.17 16.56 17.34 18.11 15.68 16.18 16.35

Area 4 22.05 23.23 23.79 24.92 26.02 22.53 23.25 23.49

Area 5 28.94 30.49 31.22 32.70 34.15 29.57 30.50 30.80

Area 6 23.94 25.22 25.83 27.05 28.25 24.46 25.23 25.48

Area 7 33.61 35.40 36.25 37.96 39.64 34.33 35.43 35.80

United Utilities 59.30 64.30 69.80 76.50 82.80 70.30 72.00 72.80

Wessex 52.36 59.48 65.95 73.05 78.42 70.26 72.09 72.95

Yorkshire 64.40 68.10 69.60 75.80 81.30 68.20 70.90 71.70



96

Table C3 Water fixed charges 1995-96 to 2002-03 – household customers takingunmeasured supplies

£/year1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03


Anglian:

Anglian 37.35 41.38 45.79 51.92 56.84 60.15 65.07 69.12

Hartlepool 84.00 88.00 90.80 95.52 95.52 85.96 85.15 87.56

Dwr Cymru 81.28 82.29 84.19 85.67 83.23 80.00 80.65 80.23

Northumbrian:

Essex & Suffolk 22.00 22.00 22.50 24.00 25.00 25.00 26.00 26.50

Northumbrian: 52.00 49.00 49.00 49.00

Northumbrian 52.00 52.00 52.00 52.00

North East 30.50 36.00 42.00 47.00

Severn Trent – – – – – – – –

South West 40.00 41.50 42.70 44.30 46.00 43.40 45.40 47.90

Southern 21.00 22.00 23.30 24.60 26.20 22.00 22.00 21.70

Thames 14.00 15.00 16.00 17.00 18.00 16.00 16.00 16.00


Wessex 24.00 16.00 11.00 7.00 7.00 7.00 7.00 7.00

Yorkshire:

Yorkshire 22.00 23.00 23.00 25.00 27.00 23.00 23.00 23.00

York 20.50 21.00 21.00 21.80 22.50 21.00 21.00 21.00


Bournemouth 25.00

West Hampshire 20.00

Bristol 21.00 21.00 20.00 21.00 20.00 18.00 18.00 18.00

Cambridge 20.00 16.00 16.42 16.85 17.15 15.35 16.00 16.00

Cholderton 25.50 25.50 25.50 27.50 28.50 27.00 26.10 26.00

Dee Valley:

Chester 28.00 28.00 28.00 28.55 29.27 26.40 26.61 26.74

Wrexham 70.08 71.11 71.92 73.22 74.21 66.93 67.46 67.80

Folkestone & Dover 25.00 25.00 26.00 26.00 26.65 27.02 28.20 30.16

Mid Kent 24.00 24.00 24.96 26.16 27.24 35.00 38.00 40.00

Portsmouth1 31.00 31.50 31.50 32.50 32.10 26.00 24.00 22.00

South East: 18.00 17.50 17.50 12.00 12.00 12.00 12.00

Mid Southern 20.40

South East 25.00

South Staffordshire – – – – – – – –


Northern Area (Sutton) 108.00 111.00 112.00 116.48 115.00 99.00 106.00 107.40

Southern Area & Croydon 34.00 35.05 36.00 37.00 37.00 30.00 32.00 32.00

Tendring Hundred 27.00 25.00 23.00 24.00 25.00 24.00 27.00 28.00

Three Valleys:

North Surrey 25.00 26.00 26.00 28.00 29.00 21.00 22.00 22.50

Three Valleys 25.20 26.90 28.68 30.92 32.62 28.14 29.40 30.10


Note:1 These charges apply from 1 July.


97

Table C4 Sewerage fixed charges 1995-96 to 2002-03 – household customers takingunmeasured supplies

£/year1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03


Anglian 40.40 45.01 50.81 59.11 67.14 71.48 81.56 90.89

Dwr Cymru 81.72 86.80 90.79 97.66 103.67 92.75 99.45 102.98

Northumbrian 52.00 55.00 60.00 65.00 75.00 67.00 68.00 68.50

Severn Trent – – – – – – – –

South West 38.50 40.80 43.50 45.10 47.50 42.00 44.10 46.70

Southern 31.60 33.40 36.10 38.60 42.00 38.00 38.00 38.50

Thames 26.00 27.00 28.00 29.00 30.00 27.00 28.00 28.00

United Utilities – – – – – – – –

Wessex 25.00 16.00 11.00 7.00 7.00 7.00 7.00 7.00

Yorkshire 19.00 20.00 21.00 22.00 24.00 25.00 25.00 25.00



98


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100

Tab

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2 M

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tari

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2002

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mm

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32m

m40

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75m

m10

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125m

m15

0mm

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m25

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m50

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char

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(1/2

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")(2

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")(4

")(5

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(12"

)(2

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p/m

3p

/£R

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Table D3 Sample metered water bills in 2001-02 and 2002-03 – non-household customers

£/yearAnnual bill for

Business 1 Business 2 Business 32001-02 2002-03 2001-02 2002-03 2001-02 2002-03


Anglian1,3 104 109 686 706 102,720 103,247

Hartlepool2,3 65 66 399 410 72,920 71,156

Dwr Cymru 108 109 1,138 1,143 127,991 129,113

Northumbrian:

Essex & Suffolk:

Essex 82 82 816 815 111,010 111,490

Suffolk 105 105 1,048 1,048 156,440 157,120

Northumbrian 72 73 722 723 92,790 93,700

Severn Trent 94 94 835 835 104,199 104,869

South West 93 98 811 859 133,498 140,169

Southern 78 78 967 890 106,540 105,810

Thames 78 78 872 878 98,835 99,818

United Utilities 110 111 880 899 135,250 137,714

Wessex 100 102 1,085 916 138,520 140,440

Yorkshire:

Yorkshire 94 95 932 943 107,913 109,213

York 69 70 555 560 88,849 89,699

Water only companiesBournemouth & W Hampshire3 79 80 861 871 102,230 100,654

Bristol 88 91 714 739 110,940 114,285

Cambridge 77 78 656 650 85,000 85,792

Cholderton 98 99 - -

Dee Valley:

Chester 76 77 770 767 118,710 122,080

Wrexham 83 82 840 818 132,670 138,695

Folkestone & Dover4 101 102 999 1,015 134,160 135,513

Mid Kent 90 95 825 858 142,858 148,612

Portsmouth5 69 69 678 678 97,192 97,177

South East6

Mid Southern 75 72 901 871 102,136 102,136

South East:

Eastbourne 121 115 1,357 1,304 179,279 179,279

Mid-Sussex 125 120 1,405 1,349 187,207 187,207

West Kent 103 99 1,183 1,139 150,076 150,076

South Staffordshire7 73 75 703 717 92,002 94,807


Northern Area 78 78 605 612 117,219 118,519

Southern Area 95 96 779 787 152,019 153,619

Tendring Hundred3 140 147 1,500 1,551 151,140 159,300

Three Valleys:

North Surrey 75 76 774 744 96,680 96,655

Three Valleys 75 76 737 744 87,415 87,425

Notes:All figures shown to the nearest £.

Business 1 Business 2 Business 3Small business Commercial building, eg hotel Major manufacturer15mm (1/2”) supply pipe 50mm (2”) supply pipe 150mm (6”) supply pipe100m3 water used per year 1000m3 water used per year 200,000m3 water used per year

Bills for Business 3 take account of large user tariffs available.1 Anglian Water’s Business 1, Business 2 and Business 3 bills are based on its Streamline Green, Streamline Orange and New Industrial Potable

tariff respectively.2 Hartlepool Business 1 and Business 2 bills are based on its commercial tariff. The Business 3 bill is based on its Industrial Potable tariff.3 In calculating the Business 3 bills for those companies with a seasonal or peak element to their large user tariffs it is assumed that consumption is

spread evenly throughout the year.4 Folkestone Water have no standing charge for a 6” supply pipe. The Business 3 bill for this company is therefore based on supplies by a

4” supply pipe.5 These charges apply from 1 July.6 The Business 3 bill is based on the Saver tariff.7 In calculating the Business 3 bill, it is assumed that the customer subscribes to a water supply of 0.6 Ml per day.


101

Table D4 Sample metered sewerage bills in 2001-02 and 2002-03 – non-householdcustomers

£/yearAnnual bill for

Business 1 Business 2 Business 32001-02 2002-03 2001-02 2002-03 2001-02 2002-03

Water & seweragecompanies

Anglian1 167 174 974 1,005 137,461 142,450

Dwr Cymru 117 120 1,098 1,136 161,648 164,093

Northumbrian 260 263 4,638 4,693 120,507 122,041

Severn Trent 142 144 3,382 3,412 94,551 95,448

South West2 161 170 1,549 1,643 301,424 319,833

Southern 122 120 1,446 1,366 195,372 196,577

Thames 81 81 1,041 1,042 92,437 92,558

United Utilities 417 409 7,824 7,674 114,210 112,021

Wessex 117 119 1,545 1,570 163,150 172,442

Yorkshire 103 107 999 1,019 138,989 136,897

Notes:All figures shown to the nearest £.

Business 1 Business 2 Business 3Small business Commercial building, eg hotel Major manufacturer£1,000 rateable value £20,000 rateable value £30,000 rateable value250m2 site area 8,000m2 site area 15,500m2 site area15mm (1/2") supply pipe 50mm (2") supply pipe 150mm (6") supply pipe100m3 water used per year 1,000m3 water used per year 200,000m3 water used per yearAll sewage is domestic strength All sewage is domestic strength 60,000m3 domestic strength sewage

140,000m3 trade effluent dischargedto sewer at 750 chemical oxygendemand and 350 suspended solids

Bills for Business 3 take account of large user tariffs available.

1 Anglian Water's Business 1, Business 2 and Business 3 bills are based on its Streamline Green, Streamline Orange and New Industrial tariffrespectively.

2 South West Water's Business 3 bill is based on its HS1 tariff.


102

Table D5 Water volumetric charges 1995-96 to 2002-03 – household customers takingmeasured supplies

p/m3

1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03Water & sewerage companiesAnglian1:

Anglian – Standard 69.62 73.98 74.45 78.76 75.95 81.37 79.84 81.44

– SoLow 106.45 110.76 107.95 93.37 101.17 108.11

– Aquacare Plus 36.76 35.95 - 50.84 51.44

Hartlepool – Standard 35.20 36.80 38.50 43.75 46.16 47.33 48.42 52.56

– SoLow 78.16 73.99 75.08 79.23

– Aquacare Plus 21.16 - 33.42 36.56

Dwr Cymru 75.39 77.15 79.00 82.35 83.95 83.74 88.25 88.80

Northumbrian:

Essex & Suffolk:

Essex 53.04 58.38 61.08 64.80 69.20 62.83 64.87 65.13

Suffolk 73.29 80.68 84.36 89.46 95.08 85.32 88.09 88.44

Northumbrian: 53.64 54.38 55.41 55.96

Northumbrian 53.43 54.80 55.83 58.57

North East 49.69 51.50 53.06 55.20

Severn Trent 62.90 65.16 67.99 73.93 77.67 76.19 77.08 77.07

South West 74.63 77.50 81.38 81.23 78.80 75.62 76.55 81.30

Southern 52.10 55.10 58.40 61.30 65.00 57.40 59.10 58.60

Thames 48.14 50.64 53.62 57.56 61.59 59.50 61.59 62.21


Wessex 67.78 73.71 77.76 81.88 85.65 78.37 83.46 84.61

Yorkshire:

Yorkshire 64.20 67.60 69.80 75.20 80.90 72.20 75.10 76.20

York 42.60 45.60 48.60 50.40 52.10 48.80 50.00 50.50


Bournemouth 56.50

West Hampshire 47.68

Bristol 52.60 55.80 59.60 63.20 67.60 65.60 69.45 71.96

Cambridge 52.00 55.20 57.20 60.00 60.60 55.40 57.80 57.80

Cholderton 65.99 74.58 76.40 79.50 82.60 78.30 80.10

Dee Valley:

Chester 49.89 52.60 54.27 54.90 57.09 56.50 59.03 60.74

Wrexham 64.95 67.51 68.36 68.36 69.38 64.81 66.01 65.76


Mid Kent1 - Standard 62.05 67.88 68.34 71.75 74.75 66.78 71.28 74.15

- Low User 100.63 88.39 94.48 98.55

- Helpu/Medico 44.16 42.99 45.00 47.50

Portsmouth 39.70 41.10 41.20 42.50 43.80 45.20 47.80 47.80

South East:

Mid Southern 55.49 59.05 59.53 61.37 65.25 58.72 60.09 57.07

South East:

Eastbourne 96.12 101.37 104.24 108.58 113.72 103.30 105.72 100.39

Mid-Sussex 101.67 106.19 109.15 113.69 118.93 108.00 110.49 104.92

West Kent 79.33 84.03 86.56 90.18 95.06 86.41 88.29 83.85

South Staffordshire 49.43 50.72 52.82 54.67 56.69 58.30 60.00 61.15


Northern Area 63.00 69.00 50.00 65.00 64.00 54.00 58.60 59.25

Northern Area (Croydon) 74.20 78.00 81.00 85.00 64.00 54.00 58.60 59.25

Southern Area 74.20 78.00 81.00 85.00 83.00 70.00 76.00 76.80


Three Valleys:

North Surrey 56.40 59.30 62.11 65.81 70.80 65.17 57.17 57.91

Three Valleys: 54.69 58.08 62.78 55.38 57.17 57.91

Colne Valley 46.19 50.09

Lee Valley 50.70 53.38

Rickmansworth 46.19 50.09

Three Valleys - Social 40.00


Note:1 Anglian Water and Mid Kent Water have three tariff options available to measured household customers.


103

Table D6 Sewerage volumetric charges 1995-96 to 2002-03 – household customers taking

measured supplies

p/m3

1995-96 1996-97 1997-98 1998-991999-2000 2000-01 2001-02 2002-03Water & seweragecompanies

Anglian1 – Standard 89.97 104.45 109.05 119.93 110.62 89.30 94.73 96.88

– SoLow 125.06 135.94 126.62 137.30 148.06 155.55

– Aquacare Plus 60.94 56.62 - 49.73 50.88

Dwr Cymru 95.40 96.43 100.86 107.15 116.67 102.84 106.58 110.35

Northumbrian 37.07 39.69 42.03 44.96 50.44 49.13 55.21 55.90

Severn Trent 53.07 58.93 60.83 59.10 59.30 47.71 47.74 48.20

South West 148.68 151.87 148.65 166.68 175.45 142.81 152.60 162.00

Southern 72.01 76.29 79.09 83.99 90.56 82.33 87.23 87.97

Thames 41.20 43.33 44.74 46.53 48.74 42.40 43.25 43.44


Wessex 71.11 76.52 79.81 84.04 87.31 79.37 84.53 87.00

Yorkshire 78.19 83.79 86.07 91.77 93.01 72.30 75.53 76.19

Industry average

(weighted) 58.53 63.83 66.88 70.56 72.59 59.31 62.62 65.42

Notes:The volumetric charges have been standardised to take account of different non-return to sewer assumptions for each company.

1 Anglian Water has three tariff options available to measured household customers.


104

Table D7 Water standing charges 1995-96 to 2002-03 – household customers taking

measured supplies

£/year1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03


Anglian1:

Anglian – Standard 27.00 24.00 24.00 24.00 24.00 9.00 16.00 20.00

– SoLow 0.00 0.00 0.00 0.00 0.00 0.00

– Aquacare Plus 66.00 64.00 – 45.00 50.00

Hartlepool – Standard 22.00 22.00 24.00 24.00 24.00 20.00 20.00 20.00

– SoLow 0.00 0.00 0.00 0.00

– Aquacare Plus 47.00 – 35.00 36.00

Dwr Cymru 33.00 23.00 23.00 24.00 24.00 21.00 20.00 20.00

Northumbrian: 24.00 24.00 18.00 16.80 16.80

Essex & Suffolk 22.00 22.00 22.50

Northumbrian: 27.00 24.00

Northumbrian 31.20

North East 30.50

Severn Trent 27.00 27.00 27.00 28.56 29.52 16.00 16.56 16.68

South West 27.20 21.00 18.60 19.20 19.80 14.40 16.32 16.56

Southern 31.00 24.00 24.40 24.40 25.00 20.00 19.00 19.00

Thames 20.00 20.00 19.00 19.00 19.00 16.00 16.00 16.00


Wessex 30.50 28.00 24.00 22.00 20.00 18.00 17.00 17.00

Yorkshire: 24.00 19.00 19.00 19.00

Yorkshire 25.00 24.00 23.00 23.00

York 36.00 29.60 22.40 23.20

Water only companiesBournemouth & W Hampshire 25.00 20.00 18.00 17.00 17.00 16.00 17.00 17.50

Bristol 24.00 22.00 21.00 22.00 22.00 18.00 19.00 19.50

Cambridge 28.00 23.80 22.80 23.65 23.90 19.00 19.00 20.00

Cholderton 30.00 22.00 20.00 20.00 20.60 17.60 17.60 18.00

Dee Valley: 23.00 24.00 24.00 19.00 17.00 16.52

Chester 25.00 24.00

Wrexham 30.00 23.00


Mid Kent1 – Standard 26.00 18.00 18.00 18.72 19.40 16.20 17.40 18.30

– Low User 0.00 0.00 0.00 0.00

– Helpu/Medico 50.00 40.00 43.00 45.00

Portsmouth 28.50 21.50 22.00 24.00 24.00 22.50 21.00 21.00

South East: 30.00 21.00 19.50 19.50 15.00 15.00 15.00 15.00

South Staffordshire 13.50 14.00 14.50 15.00 15.56 15.00 15.49 15.78

Sutton & East Surrey: 27.00 24.00 24.00 24.00 19.00 19.00 19.00

Northern Area 33.00

Northern Area (Croydon) 30.00

Southern Area 30.00


Three Valleys: 17.00 17.60 17.80

North Surrey 25.00 21.00 19.50 21.00 21.00

Three Valleys – Standard 26.00 24.00 22.00 22.00 20.00

– Social 43.00


Note:1 Anglian Water and Mid Kent Water have three tariff options available to measured household customers.


105

Table D8 Sewerage standing charges 1995-96 to 2002-03 – household customers taking

measured supplies

£/year1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03


Anglian1 – Standard 20.00 12.00 12.00 12.00 12.00 36.00 40.00 44.00

– SoLow 0.00 0.00 0.00 0.00 0.00 0.00

– Aquacare Plus 71.00 66.00 - 85.00 90.00

Dwr Cymru 5.00 11.00 11.00 11.00 11.00 11.00 10.00 10.00

Northumbrian 57.00 60.00 63.60 67.80 76.00 50.00 43.00 43.00

Severn Trent - - - - - 8.00 8.28 8.40

South West 9.00 9.30 9.00 9.36 9.72 22.20 8.16 8.28

Southern 33.00 28.00 34.00 36.00 36.00 32.00 32.00 32.30

Thames 35.00 36.00 38.00 40.00 41.00 37.00 38.00 38.00


Wessex 38.20 36.00 36.00 36.00 36.00 32.00 32.00 32.00

Yorkshire 19.00 18.00 18.00 19.00 20.00 25.00 25.00 25.00


Notes:1 Anglian Water has three tariff options available to measured household customers.


106

Office of Water ServicesCentre City Tower, 7 Hill Street, Birmingham B5 4UA

Telephone: 0121 625 1300 Fax: 0121 625 1400

Website: www.ofwat.gov.uk e-mail: [email protected]

ISBN 1 874 234 86 8

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