Costs principle
Water Bill, Glossary: water terms, published by the Department for Environment, Food and Rural Affairs in November 2013, defines the costs principle as: ‘The basis for setting wholesale charges and charges for use of the system under the existing Water Supply Licensing regime. These charges are based on the end retail price to the customer under the current arrangement minus any costs ‘avoided’ by the incumbent water company as a result of the customer switching suppliers, but the incumbent can add on any costs of serving the licensee. An example would be the costs avoided if the company no longer has to send bills. The costs principle has been widely criticised for creating only a small margin on which a licensee can compete when setting prices. The charging guidance, in combination with Ofwat’s charging rules, will replace the costs principle with a more flexible charging regime.’
[edit] Related articles on Designing Buildings
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- Incumbent.
- Mains water.
- Ofwat.
- Public water supply.
- Sewerage.
- Statutory undertaker.
- Types of water.
- Water Act 2014.
- Water.
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