Connection charge rule changes end unfair discounts

Ofwat has published plans to end the situation whereby New Appointments and Variations (NAV) holders are excluded from discounted new connection charges currently offered to developers and others. The change to the so-called income offset discount was a “notable issue” addressed in Ofwat’s recently published decision on new rules governing the connection charges in England.

Ofwat said it’s decision on income offset – which is intended to reflect income the incumbent water company would make from the connection – will enable incumbent water companies, Self Lay Organisations (SLOs) and NAVs to compete on a level playing field. It will apply under a temporary measure to charges from 1 April 2018 before coming fully into play by April 2020.

Ofwat said it has ruled that income offset would be netted off the infrastructure charge – which covers the incumbent’s costs of network reinforcement – so every new connection would receive an income offset.

The regulator has decided that for the period 2018-2020 the income offset for NAVs would be a one-off payment added to the incumbent’s bulk supply agreements with NAVs, unless the incumbent already has a NAV specific bulk supply tariff.

Where there is a NAV supply tariff the incumbent will be permitted to keep the tariff agrement providing it can assure Ofwat “that its treatment of the income offset leads to a value that is equivalent to the case when the payment would be one-off.” But it should amend its NAV tariff to a one-off payment as soon as spoonable before April 202.

The regulator said changes to rules for new connection charges and charge scheme rules decided by Ofwat in December 2016 will be spelled out before April 2019.

• Ofwat has published licence modifications to enable it to implement the new charging rules. The modifications apply to licence condition C which relates to water and sewerage infrastructure charges.