SURFACE DRAINAGE - DETAILED PROPOSALS
Surface Drainage
23. The non-household charge currently includes an identified element to recover the cost to SW of receiving into its sewers, rainwater that drains from the surfaces of, and adjacent to, non-household premises (such as roofs, car parks etc). The large volumes of water from these sources place a substantial strain on wastewater infrastructure. This is reflected in the surface drainage charge for this service, which is a flat rate based on the premises' rateable value. In practice, this tends to cause high value premises, with relatively modest areas being drained, to pay more than lower value premises with substantial drainage, giving rise to a cross-subsidy similar in type to that which exists among un-metered water customers. Given the significance of this part of the service, there is an argument that charges should be as cost-reflective as possible, in order that those premises which in practice place the greatest burden on the system contribute most to the costs. Consequently, the Executive's 2004 consultation, "Paying for Water Services", proposed a departure from the current RV basis for charging for surface (not roads) drainage to a charging structure based on the surface area.
24. The Executive's detailed proposals for changing the basis for charging for surface drainage (which in broad terms involves the creation of a system that would place all non-household premises and their surrounding surface areas into one of a number of bands intended to reflect the area of roof, car parking etc. that discharges to the public sewers) are set out below. Given the level of preparatory work required the changes will not take effect until 2010. The proposals, which have been developed with SW and the Commission, include SW's proposed methodology for determining wholesale charges for surface drainage and the practical steps which will have to be taken by it for these changes to be implemented from 2010.
Banded surface drainage charges from 2010
25. The Executive is proposing a banded charging structure for surface drainage, similar to that implemented by some companies in England and Wales. The effect of this will be that, from 2010, customers will be placed into a band according to the area of their property and will pay a corresponding charge.
26. In designing its wholesale charging structure for surface drainage, SW will determine how many bands there should be and what the appropriate boundaries are for these bands. Inevitably, given that there are around 130,000 non-household properties, the exercise of measuring property areas will be time consuming. It is therefore likely that a proportion of these customers will automatically be placed into a band without their area being measured. This can be achieved if the lowest size band is reasonably wide (capturing, for example, most properties on a high street). For example, Northumbrian Water undertook an initial trawl of customers by location and identified those that were based in urban areas (e.g. high streets) and/or in office blocks and were therefore expected to have a small surface area. These customers were automatically placed in Band 1 for charging purposes.
27. The number of bands applied by those companies in England and Wales operating a similar scheme varies between eight and twenty-two. In identifying the number of bands required in Scotland, a balance will need to be struck between practicality (i.e. a small number of wide bands) and cost reflectivity (more bands to reflect the distribution of properties). The actual number of bands and their boundaries will be determined by SW, based on an assessment of the distribution of a representative sample of non-household property areas. This approach which was previously adopted by Northumbrian Water in the design of its scheme will highlight groups of customers that can be identified and combined into bands. In determining the number of bands, SW may include an additional, very small band to deal with those customers (e.g. lock-ups and kiosks) which have a very small surface area.
Definition of surface area
28. The surface drainage charging scheme could be based on either the total area of a property or on the drained area only. This will depend on:
- which area is the best indicator of the cost burden imposed by customers;
- the practicalities of designing the charging scheme using that area based measure; and
- the impact that the charging scheme has on customer incentives to reduce the burden they place on the system.
29. In principle, the surface area that affects the burden placed on the system is the drained area of a property. In practice however, it is more difficult to identify and measure the drained area of a property than the total boundary area and changes to the area need to be monitored regularly. For example, it is feasible that a property with a large grass area could, within a matter of months, have a large car park that drains to the sewer. The end charging regime should however recognise the benefits of sites where the volume of rainwater discharged to the public sewers has been reduced through the use of more sustainable drainage methods such as permeable paving or soak-aways.
30. To address those practical concerns identified above however, a number of conditions may need to be placed on the scheme. For example;
- the size of an exempt (non-drained area) should be greater than 10% of the total area to limit the number of requests made for minor changes to this area; and
- where it is difficult to identify the drained area, SW may send a bill to customers based on the total area and encourage them to seek a reduction in the bill by providing evidence that the drained area is smaller.
31. SW would need to have in place systems to monitor changes in the nature of the drained property area.
Measuring the area
32. GIS software allows for sites (or postcodes) to be linked to a map and for the area of the site to be measured. Northumbrian Water took advantage of similar software to develop their area-based charging scheme. It is therefore possible to calculate the area of most customers' properties without undertaking a large scale surveying exercise. Some on-site surveys would however need to be undertaken, to verify results and account for non-standard properties - i.e. where the boundaries between one site and another are not clear. In these circumstances, SW and retailers would need to agree arrangements for ensuring that property access is available.
Dealing with multi-occupancy sites
33. Those companies in England and Wales which have introduced a similar system have had to deal with the problem of calculating appropriate charges for customers that share the same site and where, as a consequence, it is often difficult to collect information on individual premises within that site. This includes retail parks, office blocks and industrial estates. An approach, similar to that adopted in England and Wales, would be to undertake an on-site survey of all the premises in each of these sites. Individual premises would then be charged on the basis of the proportion of the site area occupied, reflected in the allocated size band. While this would be a time consuming exercise it would be consistent with the principle of area based charging. An alternative approach, which has also been adopted by some companies in England and Wales, would be to allocate site area to properties on the basis of existing RVs. Such an approach would minimise the number of on-site surveys required. The case for pursuing either approach will depend on the number and size of sites involved, and the expense and time involved.
Exceptions
34. While the Executive's intention is to replace the link between individual non-household premises and their RV in respect of property drainage, this intention does not extend to replacing the link between non-household premises and their rateable value in respect of roads drainage. In " Paying for Water Services" the Executive recognised that non-household customers in particular consider it unreasonable to pay these charges. It noted however that the alternative would be for the cost to be met by local authorities, which would be a new burden on Council tax, business rates or central government support. It suggested that such a change would be unsatisfactory. That remains the Executive's view. Given that the cost of roads drainage services does not depend on the volume of water consumed by a customer and neither does it depend on the surface area of the customer's property, the Executive does not consider it appropriate to change the current basis for charging for roads drainage.
35. A number of non-household customers are not connected to the sewer or are not connected for surface drainage. Non-household customers that are not connected to the sewer - i.e. those customers with septic tanks - should be exempt from paying any surface drainage charges (property and roads). Customers who are connected to the sewer for foul sewerage services but not for surface drainage services would still be expected to contribute to the cost of roads drainage.
General Level of Charges
36. The level of charges will be set so that the revenue earned by SW from surface drainage wholesale charges does not increase or decrease as a result of the change in the charging basis. While at this time, the detailed information is not available to illustrate the actual effect of the introduction of these changes to customer's bills, experience from England and Wales suggests that variations in charges will be seen by those customers that place a greater burden on the system.
Timetable for introducing area based charging
37. It is proposed that the wholesale charging scheme for surface drainage will be introduced from 2010 for all non-household customers. In advance of this, SW will develop a final customer database, containing the relevant information which will allow retailers bills to be linked to property surface areas. SW will link this database to the required GIS software and collect the data on customer areas to allow the banding structure to be designed. SW will also provide retailers with advance notice of what the measured area is, and what the associated charge is therefore likely to be before the new scheme is introduced. It is assumed that retailers will then share this information with customers. This will allow any customer concerns to be addressed and where necessary, amendments made to the measured area before customer bills are formally changed.
38. The exercise, of recording site areas, is likely to take between one and two years to complete. SW will therefore begin the process of developing a customer database and linking it to a GIS system as soon as possible in order that work related to measuring customer areas can begin.
39. SW will inform licensed retailers in 2009 of details of the scheme that will be introduced. Licensed retailers should be able to contact all final customers (excluding those that can be automatically placed in lower bands) with a map of their site and the calculated drained area and may also provide information on the implied wholesale charge. The charge to customers will depend on how retailers choose to charge for surface drainage themselves. Scottish Water will also establish a system to allow customers - possibly through their retailer - to query and appeal SW's measurement of the area.