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Water Charges: Churches

Volume 475: debated on Tuesday 29 April 2008

To ask the Secretary of State for Business, Enterprise and Regulatory Reform (1) for what reasons exemptions and reliefs on water charges for churches and charities will be removed in 2010; and if he will make a statement; (201152)

(2) what assessment he has made of the effect on churches and charities of the removal of exemptions and reliefs on water charges in 2010; and if he will make a statement;

(3) what representations he has received on the removal of exemptions and reliefs on water charges for churches and charities in 2010;

(4) what discussions he has had with (a) Ofwat, (b) the Consumer Council for Water and (c) other water industry representatives on the removal of exemptions and reliefs on water charges for churches and charities in 2010;

(5) if he will review the decision to remove exemptions and reliefs on water charges for churches and charities in 2010.

I have been asked to reply.

In 2000 the Secretary of State issued guidance on matters to be taken into account by Ofwat, the industry's economic regulator, in agreeing companies' charges schemes, including charging non-household users that are not businesses. These include places of worship, community facilities, charities and voluntary bodies. The guidance stated that those making similar demands on a service should be charged on the same basis. It also made clear that where premises impose customer-related costs in line with or lower than those of typical households, they should be able to benefit from tariffs which reflect their small demand on the water system.

Churches were traditionally zero rated under the rateable value system of charging, meaning that they did not have to pay surface water drainage (SWD) charges. However the replacement of rateable value charges for SWD with a site area based charge means that churches will be required to pay surface water drainage charges and will no longer benefit from the cross subsidy that resulted from the rateable value system.

Ofwat reviewed companies' approaches to charging for SWD in 2003. In RD35/03, ‘Surface water drainage—charging policy’ (September 2003), Ofwat concluded that charging according to site area was the best method of charging for SWD. Ofwat recommended that water companies consider introducing site area-based charging for SWD—particularly for non-household customers where the process is simpler to implement. However Ofwat also noted that, given that set up and administration costs of introducing this method were considerable, and would vary depending on customer base, it was for individual companies to decide if the benefits of implementing site area SWD charging outweighed the costs.

For sewerage customers served by United Utilities the site area based SWD charge was introduced in 2007-08 for new and substantially altered properties. In 2008-09 it is being introduced for all non-household properties, including churches. The move to site area charging will be phased in over three years to reduce the year-on-year impact on those customers who will see an increase in their charges.

The most cost reflective way of charging non-household customers for SWD is by reference to the customer's site area, because the larger the site area, the more surface water will drain from it. SWD charges based on site area are only payable for areas which drain (directly or indirectly) into public sewers. Chargeable areas will be adjusted to take account of large grassy or gravelled areas, such as church yards or burial grounds that do not drain into a public sewer. Surface area based charging offers strong incentives to customers to reduce surface water drainage costs they impose on companies, for example by installing soakaways. Charges can therefore be mitigated by customers by installing such devices. The approach aligns with the Government's water strategy for fair, affordable and cost reflective water and sewerage charges which incentivise environmentally responsible behaviour.

Companies are obliged under their licences to ensure that charges are neither unduly preferential or unduly discriminatory between groups of customers. Ofwat therefore considers that churches and other places of worship should be treated no differently to other non-household customers.

Ofwat has held discussions with the Consumer Council for Water which supports the proposal for all companies to charge surface water drainage by site area.