Annex 1
TYPICAL MEASURED
AND UNMEASURED
BILLS
In our draft determination document we presented
typical measured and unmeasured bills in addition to average bills.
For some companies eg South West the increases in average bills
are, significantly less than the increases in typical measured
and typical unmeasured bills. All the bill figures are in current
prices (using November 2003 RPI).
Average household bills
These are calculated as the total household
revenue divided by the number of household properties. This takes
into account the changes to all household customer bills—including
those who are measured, unmeasured, those who switch from being
unmeasured to measured and any growth in customer numbers or water
delivered.
Typical measured bills
These are calculated for a customer with average
measured consumption in 2002-03, where consumption remains constant
each year to 2009-10.
Typical unmeasured bills
These are calculated for a customer with average
rateable value in 2002-03, where rateable value remains constant
each year to 2009-10.
The typical bill figures illustrate the change
in bills, year on year, that customers can expect assuming they
remain on the same charging basis and use a similar amount of
water. Although, the actual change in bills for individual customers
might be much higher or lower than this.
So as WaterVoice set out typical measured bills
in the South West increase by 29% while typical unmeasured bills
increase by 35%. However, average bills increase by only 17% because
during the period (2004-05 to 2009-2010) 113,000 households are
expected to switch from unmeasured to measured supplies.
This is probably best explained by thinking
of three groups of customers:
(1) those that remain on measured bills 47%;
(2) those that are currently on unmeasured
bills and do not choose to change to a meter during the period
36%; and
(3) those that choose to switch during the
period.
Currently about 301,000 of South West Water's
households are metered. By 2009-10 we anticipate that about 446,000
of households will be metered. We have assumed that 113,000 people
will choose to have a meter and 32,000 new households will be
built with a meter. The 113,000 customers who switch will do so
because they expect to save money.
All this is dependent on the assumed number
of households that switch from an unmeasured to measured bill.
If the outturn is significantly different from our assumption
either the company or we can trigger an interim determination.
Part of the reason for the large number of assumed switchers is
the rate of increase in bills driven by the continuing improvement
programme in the South West and its impact on customers' bills.
It is quite conceivable that our estimates of switcher numbers
are an understatement and that actual switching rates and therefore
impacts on customers who do not switch will be even greater.
The company needs to collect a similar amount
of revenue to run its business from its customers whether or not
they choose to switch to a meter. Meter optants on average use
only a little less water post metering and so place almost the
same burden on the company in terms of demand for water, but costs
are increased due to installing, maintaining and reading meters
and increased costs in billing metered accounts. As the 1999 Water
Industry Act requires companies to provide free domestic meters
on request, companies do not have control of metering programmes
and this has led to significant price increases for both measured
and unmeasured bills, without providing a corresponding benefit
for all customers. While the cost of the metering policy falls
on all measured households as a group the impact of lower bills
for measured customers also means any increase in total revenue
requirement has a greater impact on all customers. The greater
the number of customers choosing to switch the greater the burden.
November 2004
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