MODIFICATIONS TO ORIGINAL DOCUMENT

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DEPARTMENT OF THE ENVIRONMENT

Instrument of Appointment by

the Secretary of State for the Environment

of Southern Water Services Limited

as a water and sewerage undertaker under the Water Act

1989

Department of the Environment

August 1989

Printed with amendments up to 12 September, 2000

INSTRUMENT OF APPOINTMENT OF SOUTHERN WATER SERVICES LIMITED

AS A WATER UNDERTAKER AND AS A SEWERAGE UNDERTAKER

This publication contains the full text of the Instrument of Appointment of Southern Water Services Ltd as a water and sewerage undertaker by the Secretary of State for the Environment under Sections 11 and 14 of the Water
Act 1989 (now Sections 6,7,11 and 12 of the Water Industry Act 1991) and includes modifications and variations by the Director General under Sections 11 to 17 of the Water Industry Act.

The texts on which this is based, including full scale maps of the area(s) of appointment is held in the Directors register and may be inspected during normal office hours at the Office of Water Services, 13th

Floor, Centre City Tower, 7, Hill St, Birmingham, B5 4UA, Telephone number : 0121 625 1300

Printed with amendments up to 12 September, 2000

|Table of Contents                                    |                                                                                    
|---------------------------------------------------- | -----------------------------------------------------------------------------------
|The Appointments                                     | 1                                                                                  
|                                                     |                                                                                    
|Schedule 1: Area for which the Appointments are made | 2                                                                                  
|                                                     |                                                                                    
|Schedule 2: Conditions of the Appointments           | 15                                                                                 
|                                                     |                                                                                    
|A.                                                   | Interpretation and Construction                                                    
|                                                     |                                                                                    
|B.                                                   | Charges                                                                            
|                                                     |                                                                                    
|C.                                                   | Infrastructure Charges                                                             
|                                                     |                                                                                    
|D.                                                   | Charges Schemes                                                                    
|                                                     |                                                                                    
|E.                                                   | Prohibition on Undue Discrimination and Undue Preference and Information on Charges
|                                                     |                                                                                    
|F.                                                   | Accounts and accounting information                                                
|                                                     |                                                                                    
|G.                                                   | Code of Practice for Customers and relations with the Customer Service Committee   
|                                                     |                                                                                    
|H.                                                   | Code of Practice and Procedure on Disconnection                                    
|                                                     |                                                                                    
|I.                                                   | Code of Practice and Procedure on Leakage                                          
|                                                     |                                                                                    
|J.                                                   | Levels of Service Information and Service Targets                                  
|                                                     |                                                                                    
|K.                                                   | "Ring Fencing", Disposals of Land and Changes of Use of Land                       
|                                                     |                                                                                    
|L.                                                   | Underground Asset Management Plans                                                 
|                                                     |                                                                                    
|M.                                                   | Provision of Information to the Director                                           
|                                                     |                                                                                    
|N.                                                   | Fees                                                                               
|                                                     |                                                                                    
|O.                                                   | Circumstances in which a replacement appointment may be made                       
|                                                     |                                                                                    
|P.                                                   | The Role of Scottish Power PLC                                                     
|                                                     |                                                                                    
|Q.                                                   | Interruptions in Supply Because of Drought                                         
|                                                     |                                                                                    
|Guide to Defined Terms                               | 118                                                                                

Printed with amendments up to 12 September, 2000



|TABLE OF CONTENTS                                    |                                                          
|---------------------------------------------------- | ---------------------------------------------------------
|                                                     |                                                          
|THE APPOINTMENTS                                     |                                                          
|                                                     |                                                          
|                                                     |                                                          
|                                                     | The Appointments to be a water and sewerage undertaker   
|                                                     |                                                          
|SCHEDULE 1: AREA FOR WHICH THE APPOINTMENTS ARE MADE |                                                          
|                                                     |                                                          
|1.                                                   | The Water Supply Area                                    
|                                                     |                                                          
|2.                                                   | The Sewerage Services Area                               
|                                                     |                                                          
|3.                                                   | Interpretation and Construction of Schedule 1            
|                                                     |                                                          
|                                                     | Appendix:                                                
|                                                     |                                                          
|                                                     | Part I, which lists premises and installations           
|                                                     | comprised in the Water Supply Area                       
|                                                     |                                                          
|                                                     | Part II, which lists premises not comprised in the       
|                                                     | Water Supply Area                                        
|                                                     |                                                          
|SCHEDULE 2: CONDITIONS OF THE APPOINTMENTS           |                                                          
|                                                     |                                                          
|Condition A: Interpretation and Construction         |                                                          
|                                                     |                                                          
|1 &2.                                                | General provisions as to interpretation and construction 
|                                                     |                                                          
|3.                                                   | Defined terms used in the Conditions                     
|                                                     |                                                          
|4.                                                   | References to the Water Authority to include references  
|                                                     | to the Water Authoritys predecessors in title in certain
|                                                     | circumstances                                            
|                                                     |                                                          
|5.                                                   | Notifications                                            
|                                                     |                                                          
|6.                                                   | Principles of construction which are to apply when one   
|                                                     | Appointment only is terminated                           
|                                                     |                                                          
|                                                     |                                                          
|7.                                                   | References to the Director of questions arising as to the
|                                                     | extent of the Water Supply Area and the Sewerage         
|                                                     | Services Area                                            
|                                                     |                                                          
|CONDITION B: CHARGES                                 |                                                          
|                                                     |                                                          
|Part I.                                              | Explanatorv Provisions                                   

Printed with amendments up to 12 September, 2000

|1.        | Introduction                                                                                                              | 
|--------- | ------------------------------------------------------------------------------------------------------------------------- | 
|          |                                                                                                                           | 
|2.        | Defined terms which apply for the purposes of all Parts ofCondition B                                                     | 
|
|          |                                                                                                                           | 
|3.        | References to the Appointee to include references to theWater Authority in certain circumstances                          | 
|
|          |                                                                                                                           | 
|Part II.  | Restriction of Standard Charges for Basket Items                                                                          | 
|          |                                                                                                                           | 
|4.        | The Charges Limit (RPI +K)                                                                                                | 
|          |                                                                                                                           | 
|5.        | Matters Affecting the Charges Limit and the calculation ofthe Weighted Average Charges Increase                           | 
|
|          |                                                                                                                           | 
|6.        | Verification of compliance with the Charges Limit                                                                         | 
|          |                                                                                                                           | 
|7.        | Transitional Provisions                                                                                                   | 
|          |                                                                                                                           | 
|Part III. | Periodic Reviews                                                                                                          | 
|          |                                                                                                                           | 
|8.        | (1.4.2000)                                                                                                                | 
|          |                                                                                                                           | 
|9.        | Periodic Reviews of the Appointed Business at regular(1.4.2000) Five yearly Intervals                                     | 
|
|          |                                                                                                                           | 
|10.       | (1.4.2000)                                                                                                                | 
|          |                                                                                                                           | 
|11.       | Periodic Reviews of the Appointed Business where aTermination Notice has been given                                       | 
|
|          |                                                                                                                           | 
|12.       | Effect of termination of the Appointments (or either of them)on Periodic Reviews                                          | 
|
|          |                                                                                                                           | 
|Part IV.  | Interim Determinations                                                                                                    | 
|          |                                                                                                                           | 
|13.       | Matters of Interpretation and construction which apply for thepurposes of Part IV                                         | 
|
|          |                                                                                                                           | 
|14.       | References to the Director relating to Notified Items andRelevant Changes.                                                | 
|
|          |                                                                                                                           | 
|15.       | Changes to the Adjustment Factor initiated by the Directorrelating to Notified Items and Relevant Changes of Circumstance | 
|
|          |                                                                                                                           | 
|Part V.   | References to the Competition Commission and Modification of Condition B                                                  | 

Printed with amendments up to 12 September, 2000



|16.                                 | References to the Competition Commission                                                                            |  
|----------------------------------- | ------------------------------------------------------------------------------------------------------------------- | -
|                                    |                                                                                                                     |  
|17.                                 | Modification of Condition B following Periodic Reviews and references to the Director or the Competition Commission |  
|                                    |                                                                                                                     |  
|Part VI.                            | Provision of Information to the Director                                                                            |  
|                                    |                                                                                                                     |  
|18.                                 | Information required to be furnished by the Appointee to the Director                                               |  
|                                    |                                                                                                                     |  
|Condition C: Infrastructure Charges |                                                                                                                    
|                                    |                                                                                                                     |  
|1.                                  | Interpretation and Construction                                                                                     | C
|                                    |                                                                                                                     |  
|2.                                  | Level of Infrastructure Charges                                                                                     |  
|                                    |                                                                                                                     |  
|3.                                  | [noheading]                                                                                                         |  
|                                    |                                                                                                                     |  
|4.                                  | [no heading]                                                                                                        |  
|                                    |                                                                                                                     |  
|5.                                  | [no heading]                                                                                                        |  
|                                    |                                                                                                                     |  
|6.                                  | [no heading]                                                                                                        |  
|                                    |                                                                                                                     |  
|7.                                  | [no heading]                                                                                                        |  
|                                    |                                                                                                                     |  
|8.                                  | [no heading]                                                                                                        |  
|                                    |                                                                                                                     |  
|9.                                  | Notification to Sewerage Undertakers                                                                                |  
|                                    |                                                                                                                     |  
|10.                                 | Arbitration                                                                                                         |  
|                                    |                                                                                                                     |  
|11.                                 | Periodic Review of Level of Infrastructure Charges                                                                  |  
|                                    |                                                                                                                     |  
|12.                                 | Interim Review of Level of Infrastructure Charges                                                                   |  
|                                    |                                                                                                                     |  
|13.                                 | Information                                                                                                         |  
|                                    |                                                                                                                     |  
|14.                                 | References to the Competition Commission                                                                            |  
|                                    |                                                                                                                     |  
|15.                                 | Modification of this Condition                                                                                      |  
|                                    |                                                                                                                     |  
|                                    | Appendix: Calculation of Relevant Multiplier                                                                        |  
|                                    |                                                                                                                     |  
|                                    | Explanatory Note                                                                                                    |  

Condition D: Charges Schemes

Printed with amendments up to 12 September, 2000



|1.                                                                                               | Interpretation and Construction                                                                                        | D
|------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------- | -
|                                                                                                 |                                                                                                                        |  
|2 & 3.                                                                                           | Requirement to have in effect a charges scheme                                                                         |  
|                                                                                                 |                                                                                                                        |  
|4.                                                                                               | Provisions required to be included in charges schemesrelating to Infrastructure Charges                                |  
|
|                                                                                                 |                                                                                                                        |  
|5.                                                                                               | Disclosure of information relating to charges schemes                                                                  |  
|                                                                                                 |                                                                                                                        |  
|6.                                                                                               | Section 75 agreements                                                                                                  |  
|                                                                                                 |                                                                                                                        |  
|Condition E: Prohibition on Undue Discrimination and Undue Preference and Information on Charges |                                                                                                                       
|                                                                                                 |                                                                                                                        |  
|1.                                                                                               | Charges to which Condition E applies                                                                                   | E
|                                                                                                 |                                                                                                                        |  
|2.                                                                                               | Prohibition of undue preference and undue discrimination inrelation to classes of customer                             |  
|
|                                                                                                 |                                                                                                                        |  
|3.                                                                                               | Prohibition of undue preference and undue discriminationin relation to individual customers                            |  
|
|                                                                                                 |                                                                                                                        |  
|4.                                                                                               | Requirement to provide Information to the Director aboutcompliance with the Condition                                  |  
|
|                                                                                                 |                                                                                                                        |  
|5.                                                                                               | Requirement to provide Information to the Director aboutsupplies, services and functions to which the Conditionapplies |  
|
|
|                                                                                                 |                                                                                                                        |  
|6.                                                                                               | Matters to which the Condition does not apply                                                                          |  
|                                                                                                 |                                                                                                                        |  
|7.                                                                                               | Transitional Provisions                                                                                                |  
|                                                                                                 |                                                                                                                        |  
|8.                                                                                               | [no heading]                                                                                                           |  
|                                                                                                 |                                                                                                                        |  
|9.                                                                                               | [no heading]                                                                                                           |  
|                                                                                                 |                                                                                                                        |  
|10.                                                                                              | [no heading]                                                                                                           |  
|                                                                                                 |                                                                                                                        |  
|Condition F: Accounts and Accounting Information                                                 |                                                                                                                       
|                                                                                                 |                                                                                                                        |  
|1.                                                                                               | Introduction                                                                                                           | F
|                                                                                                 |                                                                                                                        |  
|2.                                                                                               | Interpretation and Construction                                                                                        |  
|                                                                                                 |                                                                                                                        |  
|3.                                                                                               | Accounting Records                                                                                                     |  
|                                                                                                 |                                                                                                                        |  
|4.                                                                                               | Accounting Statements                                                                                                  |  
|                                                                                                 |                                                                                                                        |  
|5.                                                                                               | Segmental Information                                                                                                  |  

Printed with amendments up to 12 September, 2000



|6.                                                                 | Transactions entered into by the Appointee or the Appointed Business with or for the benefit ofAssociated Companies or other businesses or activities of the Appointee |  
|------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -
|
|                                                                   |                                                                                                                                                                        |  
|6A.                                                                | Financial RingFencing                                                                                                                                                 |  
|                                                                   |                                                                                                                                                                        |  
|7.                                                                 | Basis of allocations and apportionments                                                                                                                                |  
|                                                                   |                                                                                                                                                                        |  
|8.                                                                 | Current Cost Accounting Statements                                                                                                                                     |  
|                                                                   |                                                                                                                                                                        |  
|9.                                                                 | Audit and publication of accounting statements                                                                                                                         |  
|                                                                   |                                                                                                                                                                        |  
|10.                                                                | Guidelines and references to the CompetitionCommission                                                                                                                 |  
|
|                                                                   |                                                                                                                                                                        |  
|Appendix, which lists information to be disclosed under 6          |                                                                                                                                                                       
|                                                                   |                                                                                                                                                                        |  
|Condition G: Code of Practice for Customers and Relations with the |                                                                                                                                                                       
|Customer Service Committee                                         |                                                                                                                                                                       
|                                                                   |                                                                                                                                                                        |  
|1.                                                                 | Scope of Code of Practice                                                                                                                                              | G
|                                                                   |                                                                                                                                                                        |  
|2.                                                                 | Review of Code of Practice                                                                                                                                             |  
|                                                                   |                                                                                                                                                                        |  
|3.                                                                 | Consultation with the Customer Service Committee                                                                                                                       |  
|                                                                   |                                                                                                                                                                        |  
|4.                                                                 | Directors approval of revised Code of Practice                                                                                                                        |  
|                                                                   |                                                                                                                                                                        |  
|5.                                                                 | Modifications to Code of Practice required by the Director                                                                                                             |  
|                                                                   |                                                                                                                                                                        |  
|6.                                                                 | Publicity                                                                                                                                                              |  
|                                                                   |                                                                                                                                                                        |  
|7.                                                                 | Complaints procedure                                                                                                                                                   |  
|                                                                   |                                                                                                                                                                        |  
|8.                                                                 | Identification of personnel                                                                                                                                            |  
|                                                                   |                                                                                                                                                                        |  
|9  11.                                                            | Meetings with the Customer Service Committee                                                                                                                           |  
|                                                                   |                                                                                                                                                                        |  
|Condition H: Code of Practice and Procedure on Disconnection       |                                                                                                                                                                       
|                                                                   |                                                                                                                                                                        |  
|1.                                                                 | Scope of Code of Practice                                                                                                                                              | H
|                                                                   |                                                                                                                                                                        |  
|2.                                                                 | Review of Code of Practice                                                                                                                                             |  
|                                                                   |                                                                                                                                                                        |  
|3.                                                                 | Consultation with the Customer Service Committee                                                                                                                       |  
|                                                                   |                                                                                                                                                                        |  
|4.                                                                 | Directors approval of revised Code of Practice                                                                                                                        |  
|                                                                   |                                                                                                                                                                        |  
|5.                                                                 | Modifications to Code of Practice required by the Director                                                                                                             |  
|                                                                   |                                                                                                                                                                        |  
|6.                                                                 | Publicity                                                                                                                                                              |  

Printed with amendments up to 12 September, 2000



|7.                                                             | Disconnection procedure                                                           |  
|-------------------------------------------------------------- | --------------------------------------------------------------------------------- | -
|                                                               |                                                                                   |  
|8.                                                             | Information about disconnections to be provided to the Customer Service Committee |  
|                                                               |                                                                                   |  
|Condition I: Code of Practice and Procedure on Leakage         |                                                                                  
|                                                               |                                                                                   |  
|1.                                                             | Definition of "supply pipe"                                                       | I
|                                                               |                                                                                   |  
|2.                                                             | Scope of Code of Practice                                                         |  
|                                                               |                                                                                   |  
|3.                                                             | Review of Code of Practice                                                        |  
|                                                               |                                                                                   |  
|4.                                                             | Consultation with the Customer Service Committee                                  |  
|                                                               |                                                                                   |  
|5.                                                             | Directors approval of revised Code of Practice                                   |  
|                                                               |                                                                                   |  
|6.                                                             | Modifications to Code of Practice required by the Director                        |  
|                                                               |                                                                                   |  
|7.                                                             | Publicity                                                                         |  
|                                                               |                                                                                   |  
|8.                                                             | Procedure for adjusting charges where there is an unidentified leak               |  
|                                                               |                                                                                   |  
|Condition J: Levels of Service Information and Service Targets |                                                                                  
|                                                               |                                                                                   |  
|Part I.                                                        | Levels of Service Information                                                     | J
|                                                               |                                                                                   |  
|1.                                                             | Provision of Information                                                          |  
|                                                               |                                                                                   |  
|2.                                                             | Reports, certificates etc.                                                        |  
|                                                               |                                                                                   |  
|Part II.                                                       | Service Targets                                                                   |  
|                                                               |                                                                                   |  
|3.                                                             | Setting of Service Targets by the Appointee                                       |  
|                                                               |                                                                                   |  
|4.                                                             | Monitoring of Service Targets                                                     |  
|                                                               |                                                                                   |  
|5.                                                             | Reporting on Service Targets                                                      |  
|                                                               |                                                                                   |  
|6.                                                             | Measures to achieve Service Targets                                               |  
|                                                               |                                                                                   |  
|Part III.                                                      | Certification and Verification of Information                                     |  
|                                                               |                                                                                   |  
|7.                                                             | Auditors Certificate                                                             |  
|                                                               |                                                                                   |  
|8 - 12.                                                        | Directors investigations                                                         |  
|                                                               |                                                                                   |  
|Part                                                           | Publication of Information                                                        |  
|IV.                                                            |                                                                                   |  
|                                                               |                                                                                   |  
|13.                                                            | Publication of Levels of Service Information and Service                          |  

Printed with amendments up to 12 September, 2000



|                                                                          | Target Reports                                                 |  
|------------------------------------------------------------------------- | -------------------------------------------------------------- | -
|                                                                          |                                                                |  
|Condition K: "Ring Fencing", Disposals of Land and Changes of Use of Land |                                                               
|                                                                          |                                                                |  
|1.                                                                        | Introduction                                                   | K
|                                                                          |                                                                |  
|2.                                                                        | Interpretation and Construction                                |  
|                                                                          |                                                                |  
|3.                                                                        | "Ring Fencing"                                                 |  
|                                                                          |                                                                |  
|4.                                                                        | Disposals of protected land other than disposals by auction or |  
|                                                                          | formal tender or to Associated Companies                       |  
|                                                                          |                                                                |  
|5.                                                                        | Disposals of protected land by auction or formal tender        |  
|                                                                          |                                                                |  
|6.                                                                        | Disposals of protected land to Associated Companies            |  
|                                                                          |                                                                |  
|7.                                                                        | Disclosure of Information to Valuers                           |  
|                                                                          |                                                                |  
|Condition L: Underground Asset Management Plans                           |                                                               
|                                                                          |                                                                |  
|1.                                                                        | Interpretation and Construction                                | L
|                                                                          |                                                                |  
|2.                                                                        | Duty to furnish Information                                    |  
|                                                                          |                                                                |  
|3.                                                                        | Information Systems                                            |  
|                                                                          |                                                                |  
|4.                                                                        | Reports                                                        |  
|                                                                          |                                                                |  
|5.                                                                        | General                                                        |  
|                                                                          |                                                                |  
|Condition M: Provision of Information to the Director                     |                                                               
|                                                                          |                                                                |  
|1.                                                                        | Requirement to furnish Information to the Director             | M
|                                                                          |                                                                |  
|2.                                                                        | Form etc. in which Information to be supplied                  |  
|                                                                          |                                                                |  
|3  6.                                                                    | Restrictions on scope of Information which the Appointee can   |  
|                                                                          | be required to furnish under Condition M                       |  
|                                                                          |                                                                |  
|Condition N: Fees                                                         |                                                               
|                                                                          |                                                                |  
|1.                                                                        | Interpretation and Construction                                | N
|                                                                          |                                                                |  
|2.                                                                        | Fees                                                           |  
|                                                                          |                                                                |  
|3.                                                                        | Limit on renewal fee and special fee                           |  
|                                                                          |                                                                |  
|4.                                                                        | Protocol for the Application of Licence Condition N3.2.        |  

Printed with amendments up to 12 September, 2000



|Condition O: Circumstances in which a Replacement Appointment may be made |                                                                                                                                         
|------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------
|                                                                          |                                                                                                                                         
|1                                                                         | Requirement to give at least 10 years notice, expiring notearlier than 25 years after the transfer date, to terminate eitherAppointment
|
|
|                                                                          |                                                                                                                                         
|Condition P : The Role of Scottish Power PLC                              |                                                                                                                                         
|                                                                          |                                                                                                                                         
|1                                                                         | The procurement and contents of the undertaking                                                                                         
|                                                                          |                                                                                                                                         
|2                                                                         | Production of the undertaking to the Director General                                                                                   
|                                                                          |                                                                                                                                         
|3                                                                         | Duty to inform Director General if not longer enforceable or breached                                                                   
|                                                                          |                                                                                                                                         
|4                                                                         | Circumstances where there is a prohibition on entering into contracts                                                                   
|                                                                          |                                                                                                                                         
|Condition Q: Interruption in Supply Because of Drought                    |                                                                                                                                         
|                                                                          |                                                                                                                                         
|1.                                                                        | Interpretation                                                                                                                          
|                                                                          |                                                                                                                                         
|2.                                                                        | Liability and amounts of payments                                                                                                       
|                                                                          |                                                                                                                                         
|3.                                                                        | Amounts payable to household and business customers                                                                                     
|                                                                          |                                                                                                                                         
|4.                                                                        | Determination of Disputes                                                                                                               
|                                                                          |                                                                                                                                         
|5.                                                                        | Cessation or Modification of this ConditionExplanatory Note                                                                             
|
|                                                                          |                                                                                                                                         
|Guide to Defined Terms                                                    |                                                                                                                                         

Printed with amendments up to 12 September, 2000

THE APPOINTMENTS

|1 | The Secretary of State, in exercise of the powers conferred on him by sections 11 and 14 of the Water Act 1989 ("the Act"), (section 6, 7, 11 and 12 of the Water Industry Act 1991 ("the 1991 Act")) hereby appoints Southern Water Services Limited ("the Appointee") to be the water undertaker for the area described
in paragraph 1 of Schedule 1 and to be the sewerage undertaker for the area described in paragraph 2 of Schedule 1, subject to the Conditions set out in Schedule 2.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|2 | The appointments contained in this instrument ("the Appointments") shall come into force on the day appointed as the transfer date under section 4 of the Act.                                                                                                                                                                                                                                                                                                                                







|Authorised by the                          |                                                        |  |            
|------------------------------------------ | ------------------------------------------------------ |  | -----------
|Secretary of State to

sign in that behalf | R. S. DUDDING
An Assistant Secretary in the Department
|                                           | of the Environment                                    
|
|                                           |                                                        |  |            
|                                           |                                                        |  |            
|                                           |                                                        |  |            
|                                           |                                                        |  | August 1989
|                                           |                                                        |  |            
|                                           |                                                        |  |            



SCHEDULE 1: Area for which the Appointments are made



|1.  | The Water Supply Area                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                
|    | The area for which the Appointee is appointed to be the water undertaker ("the Water Supply Area") comprises:                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                
|    | (1)                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                
|    | (2)                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                
|    | (3)                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                
|    | but excludes the premises and installations listed in Part II of the Appendix to this Schedule.                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                
|1.2 | The seaward boundary of the area described in subparagraph 1.1(l) and of the islands referred to in subparagraph 1.1 (2) is the seaward boundary of the Water Authoritys area immediately before
the transfer date for the purposes of the 1973 Act but excluding therefrom so much of that area for which any appointment has been made under section 11 (4)(a) of the Act.
|    |                                                                                                                                                                                                                                                                                                                                                                                
|2.  | The Sewerage Services Area                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                
|2.1 | The area for which the Appointee is appointed to be the sewerage undertaker ("the Sewerage Services Area") comprises                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                
|    | (1)                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                
|    | (2)                                                                                                                                                                                                                                                                                                                                                                            



|2.2 | The seaward boundary of the area described in sub-paragraph 2.1(l) and of the islands referred to in sub-paragraph 2.1(2) is the boundary which was the seaward boundary for the purposes of section 14 of the 1973
Act of the area which immediately before the transfer date is the Water Authoritys area for those purposes but excludes the premises and installations listed in Part III of the Appendix to this Schedule.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3.  | Interpretation and Construction                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | In this Schedule:                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|



APPENDIX

|Part I: | Additional premises and installations outside the boundary of the Water Supply Area Map but comprised in the Water Supply Area
|------- | ------------------------------------------------------------------------------------------------------------------------------



|                                             | GRID REFERENCE
|-------------------------------------------- | --------------
|                                             |               
|Kings Farm, Walmer, Kent                     | TR366496      
|                                             |               
|IIedon Farm, Walmer, Kent                    | TR209524      
|                                             |               
|Keepers Cottage, Sarre, Kent                 | TR252647      
|                                             |               
|1 The Bungalow, 2 Lomas Road, Bapchild,      | TQ92926377    
|Sittingbourne, Kent                          |               
|                                             |               
|Orchard Supply, Small Holding,               | TQ82336279    
|Magpie Lane, Hartlip,                        |               
|Sittingbourne, Kent                          |               
|                                             |               
|Arran Bank Farm, Dunn Street                 | TQ79246131    
|Road, Detling, Gillingham,                   |               
|Kent ME7 3ND                                 |               
|                                             |               
|Arran Bank Farm Orchard Store,               | TQ79136147    
|Dunn Street Road, Detling, Gillingham,       |               
|Kent ME7 3ND                                 |               
|                                             |               
|Little Halstead Farm, Yelsted                | TQ78026117    
|Lane, Boxley, Maidstone,                     |               
|Kent ME14 3EJ                                |               
|                                             |               
|Westfield Sole Farm and Farmhouse and        | TQ77346118    
|Cottage, Harp Farm Road, Boxley, Maidstone,  |               
|Kent ME14 3EJ                                |               
|                                             |               
|Westfield Sole Farm Shop, house, garages and | TQ77246136    
|premises, Harp Farm Road, Boxley, Maidstone, |               
|Kent ME14 3EJ                                |               
|                                             |               
|Allotments, Wrotham Road/Park Hill,          | TQ63906826    
|Wrotham Road, Meopham, Kent                  |               
|                                             |               
|Holly Hill House, Holly Hill, Snodland,      | TQ67036332    
|Kent                                         |               
|                                             |               
|1 Holly Cottages, Holly Hill, Snodland,      | TQ67026314    
|Kent                                         |               

|2 Holly Cottages, Holly Hill, Snodland,Kent                                                            | TQ67026315
|------------------------------------------------------------------------------------------------------ | ----------
|
|                                                                                                       |           
|Bridgewood Manor Hotel,

Maidstone Road, Chatham,

Kent ME5 9AX                                        | TQ74816341
|                                                                                                       |           
|7A, 8, &9, Friars Avenue,

Walderslade, Chatham, Kent                                                  | TQ75856260
|                                                                                                       |           
|10A &12, Little John Avenue,

Walderslade, Chatham, Kent                                               | TQ75866255
|                                                                                                       |           
|1,3,5,6&7, Marlow Copse,

Walderslade, Chatham, Kent                                                   | TQ75906240
|                                                                                                       |           
|AA Station off A2 (by New Barn

Road),Watling Street,

Northfleet, Kent                                | TQ6272    
|                                                                                                       |           
|Kent County Council Maintenance

compound off A2 (by New Barn Road),

Watling Street, Northfleet, Kent | TQ6272    
|                                                                                                       |           
|APCM Sports Ground, off Taunton

Road, Galleyhill, Swanscombe, Kent                                    | TQ6174    
|                                                                                                       |           
|Dufay Titanine, off Lower Road,

Swanscombe, Nr Dartford, Kent                                         | TQ6075    
|                                                                                                       |           
|Upperfold House, North

Ambersham, West Sussex                                                         | SU9122709 
|                                                                                                       |           
|Durfold Hall Farm and Buildings,

Nr Chiddingfold, Surrey                                              | SU994332  
|                                                                                                       |           
|Priory Farm and Gardens,

(Arundel Arboretum), Tortington, Arundel                                     | TQ005061  
|                                                                                                       |           
|Climping Mill, Climping, nr Littlehampton,

Sussex                                                     | TQ015012  
|                                                                                                       |           
|Wendy Cottage, Binsted Wood, Sussex                                                                    | SU988071  
|                                                                                                       |           
|Dale Park Estate, Madehurst                                                                            | SU974102  
|                                                                                                       |           
|Upper Wilting Farm, Crowhurst

Road, Crowhurst                                                         | TQ772109  
|                                                                                                       |           




|Upper Wilting Farm Cottages,                                                                                                                | TQ772109      
|------------------------------------------------------------------------------------------------------------------------------------------- | --------------
|Crowhurst Road, Crowhurst                                                                                                                   |               
|                                                                                                                                            |               
|Hollyhocks, Crowhurst Road, Crowhurst                                                                                                       | TQ772109      
|                                                                                                                                            |               
|The Croft, Beckley Furnace, Nr Conster Manor                                                                                                | TQ829214      
|                                                                                                                                            |               
|Cottage, Beckley Furnace, Nr Conster Manor                                                                                                  | TQ829214      
|                                                                                                                                            |               
|Weir Wood Treatment Works,                                                                                                                  | TQ407355      
|Forest Row, East Sussex                                                                                                                     |               
|RHI8 5HT                                                                                                                                    |               
|                                                                                                                                            |               
|Weir Wood Sailing Club,                                                                                                                     |               
|Forest Row, East Sussex, RH18 5HT                                                                                                           |               
|                                                                                                                                            |               
|Weir Wood Fishing Lodge,                                                                                                                    |               
|Forest Row, East Sussex, RH18 5HT                                                                                                           |               
|                                                                                                                                            |               
|Nos l-5 inclusive, Weir Wood Cottages,                                                                                                      |               
|Forest Row, East Sussex, RH18 5HT                                                                                                           |               
|                                                                                                                                            |               
|Part II: Premises and installations inside the boundary of the Water Supply Area Map but not comprised in the             Water Supply Area
|                                                                                                                                            |               
|                                                                                                                                            | GRID REFERENCE
|                                                                                                                                            |               
|West Down, Shipley Hills Road,                                                                                                              |               
|Meopham, Kent                                                                                                                               |               
|                                                                                                                                            |               
|Swanton Tip, Swanton Lane,                                                                                                                  |               
|Littlebourne Road, Canterbury,                                                                                                              |               
|Kent                                                                                                                                        |               
|                                                                                                                                            |               
|Que Sera, Pett Bottom, Lower Hardres,                                                                                                       |               
|Canterbury, Kent                                                                                                                            |               
|                                                                                                                                            |               
|The Duck Inn, Pett Bottom, Lower Hardres,                                                                                                   |               
|Canterbury, Kent                                                                                                                            |               
|                                                                                                                                            |               
|Woodstock, Pett Bottom, Lower Hardres,                                                                                                      |               
|Canterbury, Kent                                                                                                                            |               
|                                                                                                                                            |               
|1, Mumpus Cottages, Lower Hardres,                                                                                                          |               
|Canterbury, Kent                                                                                                                            |               



|2, Mumpus Cottages, Lower                          |        
|-------------------------------------------------- | -------
|Hardres, Canterbury, Kent                          |        
|Little Pett Bottom, Elmsted,

Ashford, Kent        |        
|                                                   |        
|Creekend, East Guldeford, Rye,                     |        
|East Sussex TN31 7PB                               |        
|                                                   |        
|Guldeford Cottage, East                            |        
|Guldeford, Rye, East Sussex                        |        
|TN31 7PB                                           |        
|                                                   |        
|Pear Tree Cottage, East Guldeford,                 |        
|Rye, East Sussex                                   |        
|TN31 7PB                                           |        
|                                                   |        
|Offens Farm, East Guldeford,                       |        
|Rye, East Sussex                                   |        
|TN31 7PB                                           |        
|                                                   |        
|Lambs Farm Cottage, East Guldeford,                |        
|Rye, East Sussex                                   |        
|TN31 7PB                                           |        
|                                                   |        
|Nos l-4 inclusive Thornton Hill                    |        
|Cottages, Tilmanstone, Deal, Kent                  |        
|CT14 OJZ                                           |        
|                                                   |        
|New Purchase Farm, Eythorne, Dover,                |        
|Kent CT15 4DJ                                      |        
|                                                   |        
|Beeches Farm, Eythorne, Dover,                     |        
|Kent CT15 4DJ                                      |        
|                                                   |        
|l & 2, New Purchase Farm Cottages,                 |        
|Eythorne, Dover, Kent CT15 4DJ                     |        
|                                                   |        
|l & 2, Beeches Farm Cottages,                      |        
|Eythorne, Dover, Kent CT15 4DJ                     |        
|                                                   |        
|Shingleton Farm, Tilmanstone,

Deal, Kent CT14 OJZ |        
|                                                   |        
|Irrigation Supply, Monkton                         | TR29249
|Court Lane, Eythorne, Dover,                       |        
|Kent (Malmains Farm)                               |        
|                                                   |        
|GUS Transport Depot, Ratling Road,                 |        
|Aylesham, Canterbury CT3 3BD                       |        

|Rediffusion Site and Cottage,Dover Road, (Ripple Mill), Ripple,Deal, Kent CT14 8HDThe Firs, Ripple Road,Ripple, Deal, Kent CT14 8HA |         
|----------------------------------------------------------------------------------------------------------------------------------- | --------
|
|
|
|
|                                                                                                                                    |         
|Sunny Cottage, Ripple Road, Ripple,Deal, Kent CT14 8HAMill Filling Station, Dover Road,Ripple, Deal, Kent CT14 8HB                  |         
|
|
|
|                                                                                                                                    |         
|Les Memoirs, 459 Dover Road, Walmer,Deal, Kent CT14 7PQ                                                                             |         
|
|                                                                                                                                    |         
|Brackendale, 457 Dover Road, Walmer,Deal, Kent CT14 7PQ                                                                             |         
|
|                                                                                                                                    |         
|Vale View, 455, Dover Road, Walmer, Deal,Kent CT14 7PQ                                                                              |         
|
|                                                                                                                                    |         
|Cross Cottage, Ripple Cross, Ringwould,Deal, Kent CT14 8HU                                                                          |         
|
|                                                                                                                                    |         
|Cattle trough, East of A256 at Sutton                                                                                               | TR298482
|                                                                                                                                    |         
|Metered supply toMeon Shore Chalet OwnersAssociation, Hill Head, Meon, Hampshire                                                   | SU529026
|
|
|                                                                                                                                    |         
|Iron Masters House, lronmillLane, Funtley, Hampshire                                                                                | SU550082
|
|                                                                                                                                    |         
|Tapnage Cottage, TitchfieldLane, Wickham, Hampshire                                                                                 | SU552103
|
|                                                                                                                                    |         
|White Bungalow, TitchfieldLane, Wickham, Hampshire                                                                                  | SU553103
|
|                                                                                                                                    |         
|Woodmans Farm, CurbridgeLane, Shedfield, Hampshire                                                                                  | SU550152
|
|                                                                                                                                    |         
|Thistleridge Farm, LowerUpham, Hampshire                                                                                            | SU513205
|
|                                                                                                                                    |         
|Hill Lands Farm, NorthMarden, Hampshire                                                                                             | SU813159
|
|                                                                                                                                    |         
|Hatchley Cottage, Lower Upham,                                                                                                      | SU513205
|





|Hampshire                                                                                                   |           
|----------------------------------------------------------------------------------------------------------- | ----------
|                                                                                                            |           
|Deeps Cottage, Lower Upham,Hampshire                                                                        | SU513205  
|
|                                                                                                            |           
|Roughay Cottage, Popes Lane,Upham, Hampshire                                                                | SU522205  
|
|                                                                                                            |           
|Upper Lanham Farm, Wield Road,Armsworth, Alresford, Hampshire                                               | SU63553699
|
|                                                                                                            |           
|Lower Lanham Farm, Wield Road,Armsworth, Alresford, Hampshire                                               | SU63553699
|
|                                                                                                            |           
|Bradley Farm, A33, Popham,Nr Winchester, Hampshire                                                          | SU54994306
|
|                                                                                                            |           
|Calvert House FarmWoodmancott, Nr Winchester,Hampshire                                                      | SU55044305
|
|
|                                                                                                            |           
|King Edward VII Hospital,Midhurst Road, Midhurst,Sussex                                                     | SU88832643
|
|
|                                                                                                            |           
|South Leigh Parks Estates,(feed to private reservoir)Chidden Farms, Chidden,Hambledon, Portsmouth,Hampshire | SU67741975
|
|
|
|
|                                                                                                            |           
|Punsholt Farm, West TistedNr Arlesford, Hampshire                                                           | SU65772751
|
|                                                                                                            |           
|Manor Farm and Stud, WestTisted, Arlesford, Hampshire                                                       | SU65772751
|
|                                                                                                            |           
|2 drinking troughs, HomeFarm, Poultons Estate,Ower, Hampshire                                               | SU311179  
|
|
|                                                                                                            |           
|Blackwater Cottage and Trough,Back Lane, Emery Down, Hampshire                                              | SU292094  
|
|                                                                                                            |           
|Drewitts, Spronketts Lane,Warninglid, Haywards Heath,West Sussex, RH17 5TB                                  | TQ239248  
|
|
|                                                                                                            |           
|Denwood, Spronketts Lane,                                                                                   | TQ237243  
|
|
|





|Warninglid, Haywards Heath,West Sussex, RH17 5TE                                        |         
|--------------------------------------------------------------------------------------- | --------
|
|                                                                                        |         
|Wykenhurst, Shaveswood Lane,Albourne, Hassocks, WestSussex BN6 9DY                      | TQ237243
|
|
|
|
|
|
|Cattle trough at Upper Stoneham                                                         | TQ427118
|Farm, Stoneham, Lewes, EastSussex                                                       |         
|
|                                                                                        |         
|Warren Wood, Horsham Road,Handcross, Haywards Heath.West Sussex RH17 6DX                | TQ243290
|
|
|                                                                                        |         
|Warren Lodge, Horsham Road,Handcross, Haywards Heath,West Sussex RH17 6DX               | TQ244290
|
|
|                                                                                        |         
|Tudor Lodge, Ashfold Estate,Horsham Road, Handcross,Haywards Heath, West SussexRH17 6TD | TQ245289
|
|
|
|                                                                                        |         
|1 The Warren, Horsham Road,Handcross, Haywards Heath,West Sussex RH17 6DX               | TQ242289
|
|
|                                                                                        |         
|2 The Warren, Horsham Road,Handcross, Haywards Heath,West Sussex RH17 6DX               | TQ242289
|
|
|                                                                                        |         
|3 The Warren, Horsham Road,Handcross, Haywards Heath,West Sussex RH17 6DX               | TQ242289
|
|
|                                                                                        |         
|4 The Warren, Horsham Road,Handcross, Haywards Heath,West Sussex RH17 6DX               | TQ242289
|
|
|                                                                                        |         
|Yew Tree House, Brighton Road,Pease Pottage, Crawley,West Sussex RHI1 9AG               | TQ265342
|
|
|                                                                                        |         
|Silver Birches, Buchan Hill,Pease Pottage, Crawley,West Sussex RHI1 9AR                 | TQ252330
|
|
|                                                                                        |         
|Barbeeches, Buchan Hill, PeasePottage, Crawley, West Sussex                             | TQ252330
|



|RH11 9AR                        |         
|------------------------------- | --------
|                                |         
|South Lodge, Buchan Hill, Pease | TQ252329
|Pottage, Crawley, West Sussex   |         
|RH11 9AR                        |         
|                                |         
|Shelley Farm, Grouse Road,      | TQ249322
|Pease Pottage, Crawley,         |         
|West Sussex RH11 9AS            |         
|                                |         
|Drewitts Lodge, Spronketts      | TQ240248
|Lane, Warninglid, Haywards      |         
|Heath, West Sussex RH17 5TB     |         
|                                |         
|1 Drewitts Cottages, Spronketts | TQ241250
|Lane, Warninglid, Haywards      |         
|Heath, West Sussex RH17 5TB     |         
|                                |         
|2 Drewitts Cottages, Spronketts | TQ241250
|Lane, Warninglid, Haywards      |         
|Heath, West Sussex RH17 5TB     |         
|                                |         
|3 Drewitts Cottages, Spronketts | TQ241250
|Lane, Warninglid, Haywards      |         
|Heath, West Sussex RH17 5TB     |         
|                                |         
|4 Drewitts Cottages, Spronketts | TQ241250
|Lane, Warninglid, Haywards      |         
|Heath, West Sussex RH17 5TB     |         
|                                |         
|5 The Warren, Horsham Road,     | TQ242289
|Handcross, Haywards Heath,      |         
|West Sussex RH17 6DX            |         
|                                |         
|6 The Warren, Horsham Road,     | TQ242289
|Handcross, Haywards Heath,      |         
|West Sussex RH17 6DX            |         
|                                |         
|7 The Warren, Horsham Road,     | TQ242289
|Handcross, Haywards Heath,      |         
|West Sussex RH17 6DX            |         
|                                |         
|8 The Warren, Horsham Road,     | TQ242289
|Handcross, Haywards Heath,      |         
|West Sussex RH17 6DX            |         
|                                |         
|9 The Warren, Horsham Road,     | TQ242289
|Handcross, Haywards Heath,      |         



|West Sussex RH17 6DX                     |         
|---------------------------------------- | --------
|                                         |         
|10 The Warren, Horsham Road,             | TQ242289
|Handcross, Haywards Heath,               |         
|West Sussex RH17 6DX                     |         
|                                         |         
|11 The Warren, Horsham Road,             | TQ242289
|Handcross, Haywards Heath,               |         
|West Sussex RH17 6DX                     |         
|                                         |         
|Cattle trough on Hyde Estate,            | TQ247292
|Handcross, Haywards Heath,               |         
|West Sussex                              |         
|                                         |         
|Carters Lodge Farm, Horsham              | TQ239294
|Road, Handcross, Haywards                |         
|Heath, West Sussex RH17 6AA              |         
|                                         |         
|1 Newstead, Carters Lodge,               | TQ239294
|Horsham Road, Handcross,                 |         
|Haywards Heath, West Sussex              |         
|RH17 6AA                                 |         
|                                         |         
|Metered supply, Adbury House,            | SU487633
|Nr Bishops Green                         |         
|                                         |         
|Rolvenden Farm, Leasam Lane,             | TQ916210
|Playden, Rye, East Sussex TN31 7EU       |         
|                                         |         
|Sports Pavilion, Leasam Lane, Playden,   | TQ911208
|Rye, East Sussex TN31 7UE                |         
|                                         |         
|Conster Manor, Northiam Road, Playden,   | TQ827209
|Rye, East Sussex TN31 7UE                |         
|                                         |         
|Randalls Farm, Harts Green, Sedlescombe, | TQ794170
|Battle, East Sussex TN33 ORS             |         
|Tidworth                                 |         

Part III: Premises and installations inside the boundary of the Sewerage Services Area Map but

not comprised in the Sewerage Services Area

Tidworth

Note
The premises edged and hatched(red) on the Water Supply Map are included within the Water Supply Area but are served, for non-domestic purposes, in accordance with the provisions of



the West Hampshire Water (Fawley Water Supply) Order 1955 (SI 1955 No 930) as amended by section 2(2) of the West Hampshire Water (No 3) Order 1959 (SI 1959 No 1661). These premises include the land indicated by a dotted
line on the Water Supply Area map, being land through which the main is laid for the purpose of providing that supply.



Note 2: (not part of the licence)

The following properties are in Southern Waters area but by agreement between the two undertakers are supplied with water by Bournemouth and West Hampshire Water

Tudor Lodge, Ryedown Lane, East Wellow, Romsey

domestic supply to Ryedown Lodge, Ryedown Lane, East Wellow, Romsey

field supply to Harris Farms (field north of river Blackwater), East Wellow, Romsey

Lenas Pigfarm, East Wellow, Romsey

Stable Block, Woodington Rd ,, East Wellow, Romsey



|SCHEDULE 2: Conditions of the Appointment   
|--------------------------------------------
|                                            
|Condition A: Interpretation and Construction
|                                            
|1.                                          
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|2.                                          
|                                            
|                                            
|                                            
|                                            
|                                            
|3.                                          
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|
|                                            
|                                            
|
|                                            
|                                            
|                                            
|                                            
|
|                                            
|                                            
|





> whatsoever nature and whether or not created, recorded or maintained in a document;
> 
> "Charging Year"means a year commencing on 1st April;
> 
> "the Customer Service Committee"means the customer service committee to which the Appointee is allocated under section 6; (section 28 of the 1991
> 
> 
> "domestic customer"means the occupier of domestic premises;
> 
> "domestic premises"means any premises used wholly or partly as a dwelling or intended for such use;
> 
> "financial year"means a financial year of the Appointee beginning and ending on the respective dates referred to in section 227(2) of the 1985 Act;
> 
> "Group Company"means any subsidiary or holding company of the Appointee and any subsidiary of any holding company of the Appointee (other than the Appointee);
> 
> "Information"means information which is in the possession of the person required to furnish it or which it can reasonably obtain or which it can reasonably prepare from information
> which is in its possession or which it can reasonably obtain, and information which is required to be furnished under any of these Conditions shall be furnished, subject to the provisions of the Condition under which that information is required to be
> furnished, in such form and manner as the Director may reasonably require;
> 
> "Periodic Review"means a review of the Appointed Business carried out under paragraph 8, 9, 10 or 11 of Condition B, but so that references in Part IV of Condition B to a Periodic
> Review shall exclude any review carried out under paragraph 11 of that Condition and shall include the determination by the Competition Commission of the relevant questions or, as the case may be, the disputed determination referred to it under paragraph
> 16 of Condition B following the giving of a Review Notice under paragraph 8 or the giving of Information to the Director in accordance with paragraph 9 or a reference under paragraph 10;
> 
> "Prior Year"means the year commencing 1st April immediately prior to the relevant Charging Year;
> 
> "Reference Notice"means a notice given to the Director under paragraph 10, 11 or 14 of Condition B;
> 
> "the Regulated Activities"means the functions of a water undertaker or, as the case may be, a sewerage undertaker and, for the avoidance of doubt, references to the functions of a
> water undertaker or, as the case may be, a sewerage undertaker shall include references to the duties imposed on a water undertaker or, as the case may be, a sewerage undertaker;
> 
> "Related Company"means any company in relation to which the Appointee or any Group Company is a Related company within the meaning of paragraph 92 of Schedule 4 to the 1985 Act or
> which is such a Related company in relation to the Appointee or any Group Company;



> "Relevant Premises"means any office premises occupied by the Appointee in relation to the Appointed Business and to which members of the public have access;
> 
> "the Retail Prices Index"means the General Index of Retail Prices published by the Department of Employment each month in respect of all items or, if the said index for the month of
> November is not published by 31st December next following, such index for such month as the Director may not later than 7th January next following determine to be appropriate in the circumstances, after such consultation with the Appointee as is
> reasonably practicable, and in such a case references to the Retail Prices Index shall be construed for the purpose of all subsequent calculations for which the value of the Retail Prices Index for that year is relevant as references to that other index;
> 
> "Review Charging Year"means the first of the Charging Years in respect of which any Periodic Review is carried out;
> 
> "the Review Notice Date"means the first day of January which is fifteen months before the first day of the Review Charging Year;
> 
> "Sewerage Infrastructure Charge"means such a charge as is described in section 79(2)(b); (section 146 of 1991 Act)
> 
> "trade effluent"has the same meaning as in the 1937 Act;
> 
> "the Water Authority"means the Water Authority of which the Appointee is the successor company;
> 
> "Water Infrastructure Charge"means such a charge as is described in section 79(2)(a); (section 146 of 1991 Act)

|4. | In the definition of "Excluded Charges" and "Standard Charges" in Condition B and in Condition E references tothe water Authority shall include references to the Water
Authoritys predecessor in title.                                                                                                                                                                                                                                                                 
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|5. | Any notification required or permitted to be given under any Condition shall be given in writing and cognate expressions shall be construed accordingly.                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|6. | Where only one of the Appointments is terminated, so much of the provisions of these Conditions as applies or isrelevant exclusively to the Appointment which has been
so terminated or to the activities of an undertaker holdingan appointment of the kind which has been so terminated shall cease to have effect as from the date on which thetermination of that Appointment takes place.                                                                            
|
|
|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|7. | The Appointee may refer to the Director for determination by him (having considered any representations by theAppointee and any other water undertaker or as the case may be, sewerage
undertaker) any question arising as to whether any area, island, premises or installation is, or, as the case may be, are, comprised within the WaterSupply Area or as the case may be, the Sewerage Services Area) as that expression is defined in Schedule 1 to this instrument.



Condition B: Charges

Part I.Explanatory Provisions

|1.  | Introduction                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The purposes of this Condition are set out in the following sub-paragraphs.                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|1.1 | To limit increases in standard charges made by the Appointee for the supply of water, the provision of sewerage services and the reception, treatment and disposal of trade effluent. The weighted average increase
is limited to the sum of the movement in the Retail Prices Index and an Adjustment Factor, called K.                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Changes in metered charges are calculated by reference to actual consumption in a Weighting Year (a financial year of the Appointee). Changes in unmetered charges are calculated by reference to changes in average
revenue per chargeable supply calculated on the customer base as at the preceding 1st December. Changes are weighted in proportion to the contribution which each type of charge makes to total revenue in the Weighting Year.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | These matters are dealt within Part II under the heading "Restriction of Standard Charges for Basket Items."                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|1.2 | To provide for a review of the Appointed Business to be carried out by the Director at five-yearly intervals, so that the Director can determine whether the Adjustment Factor should be changed. Except where
expressly provided in this Condition all reviews will cover periods of five consecutive years. This is dealt with in Part III under the heading "Periodic Reviews." (effective from1 April 2000)                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|1.3 | To enable the Appointee:                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | These matters are dealt with in Part IV under the heading "Interim Determinations."                                                                                                                                                                                                                                                                                                                                                                







|1.4 | To provide for the Director to initiate changes to the Adjustment Factor to allow for Notified Items and RelevantChanges of Circumstance. This is also dealt with in Part IV.                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|1.5 | To enable the Appointee to require the Director to refer to the Competition Commission matters arising out ofdeterminations by the Director referred to in subparagraphs 1.2 and 1.4 and references referred to in subparagraph 1.3.These matters are dealt with in Part V under the heading "References to the Competition Commission andModification of this
Condition."                                                               
|
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|1.6 | To require the appointee to give Information to the Director to enable him to make determinations under this Condition.This is dealt with in Part VI under the heading "Provision of Information to the Director."                                                                                                                                                                                                                         
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.  | Defined Terms which apply for the purpose ofallparts of
this Condition                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | In this Condition:                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | references to"the Appointed Business"shall
be construed as if the Appointed Business included the management andholding by the Appointee of any protected land for so long as it is not transferred under paragraph 7 of Condition K;                                                                                                                                                                                                      
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | "Average Charge per Chargeable Supply"means in respect of a specified Unmeasured Basket
Item for a specified year,the amounte R, wher
e                                                                                                                                                                                                                                                                                                    
|    | =                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | N                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Ris the annual revenue (exclusive of VAT) which would accrue to the Appointee in respect of the specified Unmeasured Basket Item if all
Standard Charges (other than Excluded Charges) made or to be made in respect of that Unmeasured Basket Item in the specified year were applied to all Chargeable Supplies of the Appointee which would have been subject to those Standard Charges as at 1st
December preceding the specified year.
|
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | N is the number of Chargeable Supplies as at such 1st December for which the Appointee would have been entitled to make those Standard Charges;                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | "Basket Items"are                                                                                                                                                                                                                                                                                                                                                                                                                          
|

| |       |                                                    
| | ----- | ---------------------------------------------------
| | (1)   | unmeasured water supply,                           
| |       |                                                    
| | (2)   | unmeasured sewerage services,                      
| |       |                                                    
| | (3)   | measured water supply,                             
| |       |                                                    
| | (4)   | measured sewerage services, and                    
| |       |                                                    
| | (5)   | reception, treatment and disposal of trade effluent
| |       |                                                    
| | where |                                                    

|     | (a)                                                                                                                                                                                                                                                                                                                                                                                                                           | a measured supply or service is one where all or some of the charges for that supply or service are based on measured quantities of volume and an unmeasured supply or service is any other; and                                                                                                        
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | (b)                                                                                                                                                                                                                                                                                                                                                                                                                           | sewerage services includes sewage treatment and disposal and excludes reception, treatment and disposal of trade effluent;                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | "Chargeable Supply"means any supply of water or any provision of sewerage services for which charges are payable;                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | "Excluded Charges"unless and until otherwise agreed between the Director and the Appointee, are                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | (1)                                                                                                                                                                                                                                                                                                                                                                                                                           | amounts payable in respect of an unmeasured supply of water by means of standpipes or water tanks and in respect of the erection or maintenance of standpipes or water tanks;                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | (2)                                                                                                                                                                                                                                                                                                                                                                                                                           | charges for a supply of water provided by the Appointee under section 48 (section 59 of the 1991 Act);                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | (3)                                                                                                                                                                                                                                                                                                                                                                                                                           | charges for the reception and disposal by the Appointee, or other person specified by the Appointee or, as the case may be, the Water Authority, of matter delivered to the Appointee or such other person by a
collection authority in pursuance of section 14(9) of the Control of Pollution Act 1974;
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | (4)                                                                                                                                                                                                                                                                                                                                                                                                                           | charges for unmeasured supplies of water to cattle troughs;                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | (5)                                                                                                                                                                                                                                                                                                                                                                                                                           | charges for unmeasured building water supplies;                                                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | (6)                                                                                                                                                                                                                                                                                                                                                                                                                           | amounts payable in respect of an unmeasured supply of water by means of bowsers or water tankers;                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | (7)                                                                                                                                                                                                                                                                                                                                                                                                                           | charges for unmeasured supplies of water to farm taps and other agricultural water points; and                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|(7A) | charges for supplies of water (or for the provision of sewerage services or for the reception, treatment and disposal of trade effluent) when the requirement for water is not less than 250 megalitres per year;
but so that the reference to 250 megalitres will be reduced to the amount for the time being referred to in any Order made under section 7(6) of the Water Industry Act 1991; (effective from 1 April 2000)
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | AND, for the avoidance of doubt, but without prejudice to the meaning of Standard Charges in respect of Basket Items, shall also include                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | (8)                                                                                                                                                                                                                                                                                                                                                                                                                           | charges payable for any such connection as is described in section 79(2) (section 146 of the 1991 Act);                                                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | (9)                                                                                                                                                                                                                                                                                                                                                                                                                           | charges for a supply of water in bulk to another water undertaker;                                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                         
|     | (10)                                                                                                                                                                                                                                                                                                                                                                                                                          | amounts payable under any such agreement as is described in section 126(l)(b) (section 20 (l)(b) of the Water Resources Act 1991), (including any such agreement entered into by the Water Authority                                                                                                    



|                                                                                                                                                                                                                           | under section 81 of the Water Resources Act 1963 (section 158 of the Water Resources Act 1991), with respect to any of the matters referred to in sections 81(1)(b) and 81(1)(d) of that
Act (section 158(1)(b) and 158(1)(d) of the Water Resources Act 1991), as, by virtue of paragraph 29(1) of Schedule 26, has effect on and after the transfer date as a thing done by the Appointee); and                                                        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(11)                                                                                                                                                                                                                       | charges payable under any agreement for any unmeasured supply of water or unmeasured sewerage services which are calculated by reference to the rateable value of hereditaments, occupied
by the person to whom the supply or services are provided, fixed in accordance with section 32, 33 or, as the case may be, 34 of the General Rate Act 1967 or, as the case may be, fixed in accordance with section 54 of the Local Government Finance Act 1988
|                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|but so that where this Condition requires reference to be made to Excluded Charges in a Charging Year prior to that starting on 1st April 1990 the expression "Excluded
Charges" shall be read and construed as though:   
|                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(a)                                                                                                                                                                                                                        | there were added to subparagraph (2) of this definition the words "and charges for a supply of water provided by the Water Authority under section 37 of Schedule 3 to the 1945
Act";                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(b)                                                                                                                                                                                                                        | there were added to subparagraph (3) of this definition the words "and charges for the reception and disposal by the Water Authority, or other person specified by the Water
Authority, of matter delivered to the Water Authority or such other person by a collection authority in pursuance of section 14(9) of the Control of Pollution Act 1974"; and                                                                                              
|                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(c)                                                                                                                                                                                                                        | there were added to subparagraph (10) of this definition the words "and any agreement entered into by the Water Authority under section 81 of the Water Resources Act 1963
(section 158 of the Water Resources Act 1991) with respect to any of the matters referred to in sections 81(1)(b) and 81(1)(d) of that Act" (section 158(1)(b) & (1)(d) of the Water Resources Act 1991);                                                                    
|                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|"Measured Basket Items"means items (3), (4) and (5) in the definition of Basket Items:                                                                                                                                    
|                                                                                                                                                                                                                          
|"Nonvolumetric Charge"is a charge which is not based on measured quantities of volume;                                                                                                                                   
|                                                                                                                                                                                                                          
|"the Relevant Charging Year"means a Charging Year starting on 1st April 1995 or on the fifth anniversary of the first
day of the first of the Charging Years in respect of which the last Periodic Review was carried out;
|                                                                                                                                                                                                                          
|"Standard Charges"means                                                                                                                                                                                                   
|                                                                                                                                                                                                                          
|(1)                                                                                                                                                                                                                        | charges fixed under any such charges scheme as is referred to in section 76 (section 143 of the 1991 Act);                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(2)                                                                                                                                                                                                                        | charges payable under any such agreement as is referred to in section 75 (section 142 of the 1991 Act), (including any such                                                                                                                                                                                                                                                                                                                              



| |                                                                                                                                                                                                                         | agreement made or entered into by the Water Authority under section 30 of the 1973 Act as, in accordance with a scheme under Schedule 2, is transferred to the Appointee) under or for
which all the charges payable are in accordance with standard charges published or fixed by the Appointee or, as the case may be, the Water Authority;                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (3)                                                                                                                                                                                                                     | charges payable where a discharge is made in pursuance of a consent given by the Appointee for the purposes of the 1937 Act under or for which all the charges payable are in accordance
with standard charges published or fixed by the Appointee;                                                                                                                                                                                   
| |                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (4)                                                                                                                                                                                                                     | charges determined by agreement in respect of a supply of water provided by the Appointee for nondomestic purposes where all the charges so determined in respect of that supply are
in accordance with standard charges published or fixed by the Appointee;                                                                                                                                                                        
| |                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (5)                                                                                                                                                                                                                     | charges fixed under any such charges scheme made by the Water Authority under section 31 of the 1973 Act as, by virtue of paragraph 16(1) of Schedule 26, has effect on and after the
transfer date as if it were a charges scheme made under section 76 (section 143 of the 1991 Act), by the Appointee;                                                                                                                             
| |                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (6)                                                                                                                                                                                                                     | charges payable under any such consent or agreement under the 1937 Act as, by virtue of paragraph 13 of Schedule 26, has effect on and after the transfer date as if it were given or
entered into by the Appointee under which all the charges payable are in accordance with standard charges published or fixed by the Water Authority or, as the case may be, the Appointee;                                                      
| |                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (7)                                                                                                                                                                                                                     | charges in respect of any such supply which the Water Authority was under a duty to make under section 27 of the 1945 Act as, by virtue of paragraph 8 of Schedule 26, is a supply which
the Appointee is under a duty to make on and after the transfer date where all charges in respect of such supply are in accordance with standard charges published or fixed by the Water Authority or, as the case may be, the Appointee; and
|
| | Provided that no part of this definition shall apply to any charge which is for the time being an Excluded Charge by virtue of (7A) of the definition of excluded Charges.                                             
|
| | but so that where this Condition requires reference to be made to Standard Charges in a Charging Year prior to that starting on 1st April 1990 the expression "Standard
Charges" shall be read and construed as though:
| |                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (a)                                                                                                                                                                                                                     | there were added to subparagraph (5) of this definition the words "and any charges scheme made by the Water Authority under 31 of the 1973 Act";                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (b)                                                                                                                                                                                                                     | there were added to subparagraph (6) of this definition the words "and any consent or agreement given or entered into by the Water Authority under the 1937 Act under which all
the charges payable were in accordance with standard charges published or fixed by the Water Authority";                                                                                                                                             
| |                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                       



| | (c)                                                                                                                                                                                               | there were added to sub-paragraph (7) of this definition the words "and any such supply which the WaterAuthority was under a duty to make under 27 of the 1945 Act, where all the charges in respect of such supply were in accordance with standard charges published or fixed by the Water Authority"; and                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
| |                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                            
| | (d)                                                                                                                                                                                               | there were added a further subparagraph, (8), as follows: "charges payable under any consent, agreement, scheme or other instrument given, made or entered into by
the Water Authority under any enactment or subordinate legislation under which it is empowered to make charges under which all the charges payable were in accordance with standard charges published or fixed by the Water Authority".
| |                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                            
| | In this definition references to standard charges published or fixed by the Appointee or the Water Authority are to
such charges, whether published or fixed under a charges scheme or otherwise;
| |                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                            
| | "Termination Notice" means a notice given in accordance with Condition O;                                                                                                                        
| |                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                            
| | "Unmeasured Basket Items" means items (1) and (2) in the definition of Basket Items;                                                                                                             



|                                                                                                                                                                                                                                                                                               | "Weighted Average Charges Increase" means the sum calculated as follows:                                                                                                                                                                                                                                                                                                                        
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | At
(i)                    Bt
(j)                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                               | Wt
   =   ' ( ___.r(i) )  +  '( ___.r(j)) -1                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                               | i           At-1

(i)                       j                Bt-1
(j)                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | Where                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | Wt
is the Weighted Average Charges Increase for the Charging Year                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | i is an index identifying the two Unmeasured Basket Items                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | j is an index identifying the three Measured Basket Items                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | i                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | j                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | At
(i) is the Average Charge Per Chargeable Supply in respect of Unmeasured Basket Item i for the Charging Year                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | At-1
(i) is the Average Charge Per Chargeable Supply in respect of Unmeasured Basket Item i for the Prior Year                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | Bt
(j) is the Weighting year Revenue in respect of Measured Basket Item j for the Charging Year                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | Bt-1
(j) is the Weighting Year Revenue in respect of Measured Basket Item j for the Prior Year                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                               | r(i)or r(j) is the revenue (exclusive of VAT) which accrued to the Appointee in the Weighting Year from all Standard Charges other than Excluded Charges (including, in the
case of Measured Basket Items, any Nonvolumetric Charge)in respect of Unmeasured Basket Item i or Measured Basket Item j (as the case may be), divided by the aggregate of such revenues for all five Basket Items;
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|"Weighting Year"means the financial year of the Appointee ended last before 7th October in the Prior Year;                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                 
|"Weighting Year Revenue"means the revenue (exclusive of VAT) which would have accrued to the Appointee in the
Weighting Year in respect of the specified Measured Basket Item, if all Standard Charges other than Excluded Charges (including any Nonvolumetric Charge) made or to be made in



|         |                                                                                                                                                                                                                                                               | respect of that Measured Basket Item in the Charging Year or, as the case may be, the Prior Year had applied.
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                              
|3        | Where the calculation of the Weighted Average Charges Increase requires reference to be made to circumstancesexisting at any time or during any period prior to the
transfer date references to the Appointee shall include references tothe Water Authority.
|
|
|         |                                                                                                                                                                                                                                                              
|Part II. | Restriction of Standard Charges for Basket Items                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                              
|4.       | The Charges Limit                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                              
|4.1      | Subject to paragraph 4.1A, the Appointee shall ensure that the Weighted Average Charges Increase in any ChargingYear (beginning with the Charging Year starting on 1st
April 1990) when expressed as a percentage does not exceed theCharges Limit.          
|
|

4.1A        The Appointee shall ensure that the weighted Average Charges Increase

|    |                                                                  | (i)                                                                                                                                                                                                                                                                                                                                      | in the Charging Year commencing on 1 April 1997, when expressed as a percentage, does not exceed theCharges Limited less 1; and                                  
|--- | ---------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|    |                                                                  |                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                  
|    |                                                                  | (ii)                                                                                                                                                                                                                                                                                                                                     | in each of the Charging Years commencing on1April 1998 and on 1 April 1999, when expressed as apercentage, does not in each year exceed the Charges Limit less 3.
|
|    |                                                                  |                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                  
|4.2 | The Charges Limit is the percentage calculated as RPI + K, where
|    |                                                                  |                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                  
|    |                                                                  | RPI is the percentage change (expressed, in the case of an increase, as a positive number, in the case of adecrease, as a negative number and, in the case of no
change, as zero) in the Retail Prices Index between thatpublished for the month of November in the Prior Year and that published for the immediately precedingNovember.
|
|
|
|    |                                                                  |                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                  
|    |                                                                  | K is the Adjustment Factor.                                                                                                                                                                                                                                                                                                             
|    |                                                                  |                                                                                                                                                                                                                                                                                                                                         

|4.3 | The Adjustment Factor is:
|--- | -------------------------
|    |                          
|    | (1)                      
|
|



|(1)  |  | (2)
|---- |  | ---
|1990 |  | 5.5
|1991 |  | 5.5
|1992 |  | 5.5
|1993 |  | 3.5
|1994 |  | 3.5
|1995 |  | 4.0
|1996 |  | 4.0
|1997 |  | 4.0
|1998 |  | 4.0





|1999               |            | 4.0
|------------------ | ---------- | ---
|2000 (PR 25.11.99) | Minus 16.0
|2001               |           | 0.0
|2002               |           | 0.0
|2003               |           | 1.6
|2004               |           | 0.8



|    | (2)                                                                                                                                                                                                                                                                          | for each subsequent Charging Year, such number (which may be a different number for any Charging Year and may be a positive or negative number or
zero) as shall from time to time have been determined under this Condition or, if none, zero.                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                          
|4.4 | If the Weighted Average Charges Increase in any Charging Year is less than the Charges Limit then the Charges Limit for the following Charging Year
shall be increased by the amount of such deficiency.                                                                    
|    |                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                          
|4.5 | The Charges Limit for the Charging Year started on 1st April 1992 and each subsequent Charging Year shall only be increased by virtue of
subparagraph 4.4 to the extent that such deficiency is not attributable to any Charging Year ended three or more years previously.
|    |                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                          
|5.  | Matters affecting the Charges Limit and the calculation of the Weighted Average Charges Increase                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                          
|5.1 | Where the Appointee determines:                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                          
|    | (1)                                                                                                                                                                                                                                                                          | to make a material change (other than one which relates solely to the amount of a charge) to the basis on which it makes or
calculates any Standard Charge, or Standard Charges taken as a whole, (other than Excluded Charges) for the supply of water or the provision of sewerage services or the reception, treatment and disposal of trade effluent;
|    |                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                          
|    | (2)                                                                                                                                                                                                                                                                          | to make a material change to the scope of any such scheme, agreement or consent as is referred to in the definition of "Standard
Charges" (insofar as such change relates to charges, other than Excluded Charges, for the supply of water or the provision of sewerage services or the reception, treatment and disposal of trade effluent); or         
|    |                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                          
|    | (3)                                                                                                                                                                                                                                                                          | to change the basis on which the Appointee treats supplies of water or provisions of sewerage services as separate supplies or provisions for
the purpose of making Standard Charges (other than Excluded Charges) which affects the calculation of Average Charge Per Chargeable Supply it shall:                                                       
|    |                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                              | (a)                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                              | (b)                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                             
|5.2 | Where there is a material change to the basis of compiling the Retail Prices Index this Condition, insofar as it relates to that part of the
calculation of the Charges Limit to which the Retail Prices Index is relevant, shall be modified in such manner as the         



|    | Director, after prior consultation with the Appointee, may determine to be appropriate to take account of such change.
|--- | ----------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                       
|6.  | Verification of Compliance with the Charges Limit                                                                     
|    |                                                                                                                       
|6.1 | Statements                                                                                                            



| | The Appointee shall deliver to the Director the following statements:
| | ---------------------------------------------------------------------
| |                                                                      
| | (1)                                                                  
|

| |  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (a) | the revenue which accrued in the Weighting Year from all Standard Charges (including, in the case ofMeasured Basket
Items, any Nonvolumetric Charge), other than Excluded Charges, in respect of eachUnmeasured Basket Item i and each Measured Basket Item j;                                                                                                                                                                                                                                                                                                                                                                                                                   
|
|
| |  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | (b) | the aggregate revenue which accrued in the Weighting Year from all such Standard Charges; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | (c) | the amount of each and every type or category of charge for the supply of water, the provision of sewerage services or the reception, treatment or disposal of trade effluent
which the Appointeeproposes to make of a kind specified in the definition of "Standard Charges" as at the commencementof that Charging Year which are not
Excluded Charges (and for this purpose where the Appointeeproposes to charge different prices per cubic metre of water supplied depending upon the volume ofwater supplied or the time of supply or
the category of customer or any other variable factor then eachsuch price shall be treated as a different type or category of charge);
|
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|
|
|

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | not later than two months, or such later date as the Director may allow, before the date during any ChargingYear as from which the
Appointee proposes to make or fix a new Standard Charge (which is not an Excluded Charge) for the supply of water or the provision of sewerage services or thereception, treatment or disposal of trade effluent or to increase or decrease the amount of any such charge astatement in writing (a"Supplemental Statement") of the new charge or the amount by which the Appointeeproposes to increase or decrease the amount of that charge.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Any Principal Statement or Supplemental Statement shall be accompanied by the information necessary to calculate At
(i) and At-1
(i) and Bt
(j) and Bt-1
(j) in the definition of Weighted Average Charges Increase and a written statement of those calculations.                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|6.2 | Auditors Report                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Any Principal Statement shall be accompanied by a report by the Auditors as to whether, in their opinion, the information included in that Principal Statement under
subparagraphs 6.1(l)(a) and (b) has been properly extracted from the relevant accounting statements prepared and delivered by the Appointee under paragraph 4 of Condition F and from the Appointees accounting records and such other records of
the Appointee as the Auditors consider relevant for the purpose of making their report and as to whether, in their opinion, the calculations delivered by the Appointee
|
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|
|

|   | with that Principal Statement are in accordance with this Condition and with the Appointees accounting and such otherrelevant records.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------
|
|   |                                                                                                                                        
|7. | Transitional Provisions                                                                                                                
|   |                                                                                                                                        

|7.1 | Save with the prior written approval of the Director or as permitted under the terms of any agreement or arrangement enteredinto or made by the Water Authority before
the transfer date, the Appointee shall not increase the amount of any StandardCharge (other than an Excluded Charge) for any supply of water provided, or provision of sewerage services made, orreception, treatment and disposal of trade effluent which takes place, at
any time before 1st April 1990 or in respect of anyperiod ending before that date from the amount of such Standard Charge as at the transfer date.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|7.2 | The Director, after consultation with the Appointee, may modify this Condition by prior notice to the Appointee at any timeand from time to time while the Appointee is
wholly owned by the Crown by changing the Adjustment Factor. Any suchmodification shall have effect from the date and in respect of the Charging Years specified in the relevant notice, not being aCharging Year starting before the Director gives such notice.                                                                                                                                                           
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | (strikethrough and highlighted italics effective from 1 April 2000)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



|9.  | Periodic Reviews of the Appointed Business at Regular Five yearly Intervals                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|9.1 | The Appointee shall furnish to the Director such Information as the Director may reasonably require to enable him tocarry out a
Periodic Review for the purpose of determining the question whether (having regard to all thecircumstances which are relevant in the light of the principles which apply by virtue of Part I of the Act in relation tothe Directors
determination, including, without limitation, any change in circumstance which has occurred since thelast Periodic Review or which is to occur) the Adjustment Factor should be changed (and if so, what change shouldbe made to it for: (strikethrough and
highlighted italics effective from 1 April 2000)
|
|
|
|
|

| |     |                                                                                                                                                                                        
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | thefiveconsecutive Charging Years starting on 1 April 2005;                                                                                                                            
| |     |                                                                                                                                                                                        
| | (2) | each period of five consecutive Charging Years starting on the anniversary of the first day of theperiod in respect of which
the immediatelypreceding Periodic Review was carried out.
|

|    |                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|9.2 | The Appointee shall furnish to the Director such Information(including further detail about or explanation ofInformation previously supplied, whether or not under this subparagraph9.2)as the Director may by noticereasonably requireto enable him to carry out the Periodic Review (strikethrough and highlighted italics effective from 1 April 2000)
|
|
|    |                                                                                                                                                                                                                                                                                                                                                          
|    | (strikethrough and highlighted italics effective from 1 April 2000)                                                                                                                                                                                                                                                                                      



|11.  | Periodic Reviews of the Appointed Business where a Termination Notice has been given                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|11.1 | Where a Termination Notice has been given by the Secretary of State to the Appointee, the Appointee may refer tothe
Director for determination by him the question whether, on the assumption that such a Termination Notice hadnot been given, (but subject thereto, having regard to all the circumstances which are relevant in the light of theprinciples which apply by
virtue of Part I of the Act in relation to the Directors determination, including, withoutlimitation, any change in circumstance which has occurred since the transfer date or, as the case may be, the lastPeriodic Review or which
is to occur) the Adjustment Factor should be changed (and if so what change should bemade to the Adjustment Factor) for the ten consecutive Charging Years starting with the Charging Year starting 1stApril last before the
Termination Notice is to expire.
|
|
|
|
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|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|11.2 | A reference to the Director under this paragraph 11 shall be made by notice given to the Director not earlier than 1stJuly and not later than 14th
July in the Charging Year next but one before that commencing on the said 1st
April.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|12.  | Effect of Termination of the Appointments (or either of them) on Periodic Reviews                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     | Subject to paragraph 11, if the Secretary of State shall have served a Termination Notice on the Appointee then thisCondition shall have effect as though, in the case of the Appointment in respect of which the Termination Noticehas been given, references to a Periodic Review being carried out in respect of a period of five consecutiveCharging Years were references
to a Periodic Review being carried out in respect of the relevant Appointment inrespect of a period of that number of consecutive Charging Years which is the lesser of:                                                                                                                                                                                                                                                                                                                         

| |     |                                                                                                                                                                                                                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | five; and                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                              
| | (2) | the number of consecutive Charging Years (including that in which the day on which the Termination Noticeis to take
effect falls) in the period starting on the first day of the first of the Charging Years in respect of whichthat Periodic Review is to be carried out and ending on the day on which the Termination Notice is to expire.
|
|

|         |                                                                                         |                       
|-------- | --------------------------------------------------------------------------------------- | ----------------------
|Part IV: |                                                                                         | Interim Determinations
|         |                                                                                         |                       
|13.      | Matters of interpretation and Construction which apply for the purposes of this Part IV

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|13.1 | In this Part of this Condition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | "the Appropriate Discount Rate" means such rate of return [upon borrowing] as, at the time at which theAppropriate Discount Rate falls to be applied from time to time under this Condition, investors and creditors would
reasonably expect of a properly managed company holding the Appointments whose sole business consists ofbeing a water undertaker and a sewerage undertaker and, without excluding other
considerations which may also berelevant, having its equity share capital listed on The International Stock Exchange of the United Kingdom and theRepublic of Ireland
Limited, and the same Appropriate Discount Rate shall be applied for all purposes in determining
|
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|
|
|
|



| | questions the subject of the same reference (including questions determined by the Director under paragraph 15 when he determines questions referred to him by the Appointee under
paragraph 14);                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | "equity share capital"has
the same meaning as in the 1985 Act;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | "Interim Determination"means the determination by the Director of the relevant questions the subject of a reference by the Appointee under paragraph 14 or pursuant to paragraph 15 or, as the case may be, the determination by the Competition Commission of the relevant questions
or of the disputed determinations the subject of a reference to it pursuant to subparagraph 16(2) or 16(3), which relates to a reference by the Appointee under paragraph 14 or a determination pursuant to paragraph 15;                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | "making a Relevant Determination"means determining the Adjustment factor initially or determining, in carrying out the most recent Periodic Review, or making any subsequent Interim Determination (or, where there has been no Periodic Review, in making any Interim Determination) whether
the adjustment factor should be changed (and if so, what change should be made to the Adjustment Factor), and"Relevant Determination"shall be construed accordingly;                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | "Net Present Value"means
the net present value calculated as at 30th September in the year in which the relevant Reference Notice is given or, where in any year no Reference Notice is given under paragraph 14 but the Director gives a notice to the Appointee under paragraph 15, as
at 30th September in the year in which the Director gives the notice, by discounting subsequent cash flows and inflating earlier cash flows at the Appropriate Discount Rate, assuming all cash flows in any Charging Year occur on 30th September in that Charging Year;
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | a"Notified Item"is any
item notified by the Director to the Appointee as not having been allowed for (either in full or at all) in making a Relevant Determination; and for the purpose of this definition:                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | a "Relevant Change of Circumstance"is any of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                          | any change to any legal requirement which applies to the Appointee (including any legal requirement ceasing to apply, being withdrawn or not being renewed);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2) | either of the following circumstances for any Charging Year in respect of which the Secretary of State, or, as the case may be, the Director, notified the Water Authority or, as the case may be, the Appointee that
variations in value received or expected to be received from Relevant Disposals of Land shall constitute a Relevant Change of Circumstance:                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                          | where for any Charging Year the value received or expected to be received from a Relevant Disposal of any Identified Land is, or is expected to be, different from the value which the Secretary of State, or, as the
case may be, the Director, notified the Water Authority or, as the case may be, the Appointee was the value attributable to a Relevant Disposal of that Identified Land for that Charging Year which had been allowed for in determining the Adjustment Factor
initially or whether the Adjustment Factor should be changed (and if so what change should be made to the Adjustment Factor); or                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                          | where for any Charging Year, and to the extent not taken into account under (a) above, the aggregate value received or expected to be received from Relevant Disposals of Nonidentified Land is, or is expected
to be, different from the value which the Secretary of State, or, as the case may be, the Director notified the Water Authority or, as the case may be, the Appointee was the value attributable to Relevant Disposals of Nonidentified Land for that
Charging Year which had been allowed for in determining the Adjustment Factor or whether the Adjustment Factor should be changed (and if so what change should be made to the Adjustment Factor)
|    |                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | and so that any notification by the Director for purposes of this subparagraph (2) shall be relevant for the purposes of this subparagraph (2) to the exclusion of any earlier notification
by the Secretary of State or the Director for the purposes of this subparagraph (2) to the extent that the firstmentioned notification is made in respect of matters in respect of which that earlier notification was made.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | For the purposes of this subparagraph (2):                                                                                                                                                                                                                                                                                                                                                                                 

| |  |       |                                                                                                                                                                                                                                                                                                                                                                                            
| |  | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (i)   | "Identified Land"means any piece or parcel of protected land identified in any such notification referred to in (a) above
as is relevant for the time being for the purposes of this subparagraph (2) as being included in that notification, not being, or being part of, a piece or parcel of land which has previously been the subject of a transfer under paragraph 7 of
Condition K;
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                            
| |  | (ii)  | "land"includes any interest or right in or over land;                                                                                                                                                                                                                                                                                                                                      
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                            
| |  | (iii) | "Non-identified Land"means any piece or parcel of protected land, not being, or being part of:                                                                                                                                                                                                                                                                                             







|    |                                                                                                                           |        | (A)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | a piece or parcel of protected land identified in any such notification referred to in (a) above as is relevant for the time being for the purposes of this subparagraph (2); or
|--- | ------------------------------------------------------------------------------------------------------------------------- | ------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                           |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                  
|(B) | a piece or parcel of protected land which has previously been the subject of a transfer under paragraph 7 of Condition K;
|    |                                                                                                                           |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                  
|    |                                                                                                                           | (v)    | "protected land" and "disposal" have the meanings respectively given to them in section 189 (section219 of the 1991 Act);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
|    |                                                                                                                           |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                  
|    |                                                                                                                           | (vi)   | a "Relevant Disposal"means and includes any disposal by the Appointee and any transfer under paragraph 7 of
condition K;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
|    |                                                                                                                           |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                  
|    |                                                                                                                           | (vi)   | a "Relevant Disposal of Land"means and includes a Relevant Disposal of Identified Land and aRelevant Disposal of Non-identified Land;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |                                                                                                                           |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                  
|    |                                                                                                                           | (vii)  | "value"includes value of any kind including, without limitation, cash, the value of real or personal property
or any interest in such property, the value of any right or benefit (actual or prospective)and the value of any release, in whole or in part, of any obligation or claim, provided that to the extent that any property, right or benefit shall consist of a
right to receive cash or any other asset then no value shall be attributed to that property, right or benefit but the cash or other asset the subject thereof shall be included and treated as value received or expected to be received in the Charging Year
in which it is received or expected to be received;
|
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|
|    |                                                                                                                           |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                  
|    |                                                                                                                           | (viii) | references to "value received or expected to be received"shall be construed so as to include receipts by, and
grants to, the Appointee, any Associated Company or any other business in which either the Appointee or any Associated Company has a material direct or indirect interest;                                                                                                                                                                                                                                                                                                                                                                                                    
|
|
|    |                                                                                                                           |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                  
|    |                                                                                                                           | (ix)   | for the purpose of computing"value received or expected to be received"in respect of a Relevant Disposal of Land
which consists of a transfer made under paragraph 7 of Condition K the "value received or expected to be received" shall be the value for which that transfer is made under that paragraph 7, but so that where that value includes a right to
receive cash or any other asset then, for the purpose of this subparagraph, no value shall be attributed to that right but the cash or other asset the subject thereof shall be included and treated as value received or expected to be received in the
Charging Year in which it is received or expected to be received;  
|
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|    |                                                                                                                           |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                  
|    |                                                                                                                           | (x)    | in the case of a right or benefit, but subject to the proviso to (vii) above, value shall be deemed to have been received at the time the right is granted or the benefit arises;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                           |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                  
|    | (3)                                                                                                                       | where:
|    |                                                                                                                           |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                  
|    |                                                                                                                           | (i):   | in making a Relevant Determination, an amount has been allowed for on account of steps taken or to be taken for the purpose of securing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



| |  | or facilitating compliance with a legal requirement (not being one to comply with which the Water Authority or the Appointee has determined to make a change to the basis on which it
charges customers for water supply or sewerage services) or achieving a service standard adopted or to be adopted by the Appointee; and
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | in any such case:
| | ---- | -----------------



| | (A) | the Appointee has not taken (by the date by which it was assumed for the purposes of assessing the amount allowed for as aforesaid it would take those steps) any or all of those steps which,
for the purpose of assessing the amount allowed for as aforesaid, it was assumed it would take; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     |                                                                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (B) | as a result, the amount allowed for as aforesaid is substantially greater than the sum of (a) the costs (if any) actually incurred by the Appointee for the relevant purpose specified in (i)
above and (b) so much (if any) of that amount as has been otherwise offset by prudent management of the capital programme; and

| |     |                                              
| | --- | ---------------------------------------------
| | (C) | that purpose has not been otherwise achieved;

a"Relevant Item" is any of the following:

| | (1) | a Relevant Change of Circumstance (other than a Relevant Change of Circumstance falling within subparagraph (2) of the definition);                                                                                                                                              
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
| | (2) | a Notified Item; and                                                                                                                                                                                                                                                              
|
| | (3) | a Relevant Disposal of Land and references to a Relevant Item are to a Relevant Change of Circumstance (other than a RelevantChange of Circumstance falling within
subparagraph (2) of the definition), a Notified Item or a RelevantDisposal of Land as the context may require.
|
|

13.2      In the definition of a "Relevant Change of Circumstance" and for the purpose of that definition:

(1)       a"legal requirement" is
any of the following:



| | (a) | any enactment or subordinate legislation to the extent that it applies to the Appointee in its capacity asa water undertaker or sewerage undertaker (and for this purpose, but
without prejudice to thegenerality of the foregoing, "subordinate legislation" includes any order made under section 20(section 18 of the 1991 Act), and any authorisation granted, approval given, or prohibition imposed, bythe Secretary of  State under The Water Supply (Water Quality) Regulations 1989);
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|

| |     |                                                                                                                                                                                                
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | any regulation made by the Council or the Commission of the European Communities to the extent thatit applies to the Appointee in its capacity as a water undertaker or
sewerage undertaker, or
|



| |     |  | decision taken by the said Commission which is binding on the Appointee in its capacity as a water undertaker or sewerage undertaker and to the extent that it is so binding;                                                                                 
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |  |                                                                                                                                                                                                                                                               
| | (c) |  | any licence, consent or authorisation given or to be given by the Secretary of State, the Authority or other body of competent jurisdiction to the Appointee for the purpose of carrying on
any of the functions of a water undertaker or sewerage undertaker;
| |     |  |                                                                                                                                                                                                                                                               
| | (d) |  | any undertaking given by the Appointee to, and accepted by, the Secretary of State or, as the case may be, the Director for the purposes of section 20(5)(b) (section 19(1)(b) of the 1991
Act);                                                              
| |     |  |                                                                                                                                                                                                                                                               
| |     |  |                                                                                                                                                                                                                                                               
| | (e) |  | other than any such undertaking as is referred to in (d), any undertaking given by the Appointee to any enforcement authority, and accepted by that enforcement authority, to take all such
steps:                                                            
| |     |  |                                                                                                                                                                                                                                                               

| | (i)  | as are specified by that enforcement authority to be necessary or appropriate for the Appointee to take for the purpose of securing or facilitating compliance with any legal requirement
in relation to which that enforcement authority is the enforcement authority; or
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                           
| | (ii) | the taking of which is specified by that enforcement authority to be a condition or requirement of granting or renewing any such licence, consent or authorisation as is referred to in (c)
or agreeing not to withdraw the same;                                         
| |      |                                                                                                                                                                                                                                                                           

| | (f) | the Conditions of these Appointments; and                                                                                                                                                                                                                                            
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                      
| | (g) | any interpretation of law, or finding, contained in any judgment given by a court or tribunal of competent jurisdiction in respect of which the period for making an appeal has
expired which requires any legal requirement falling within (a) to (f) above to have effect in a way:
| |     |                                                                                                                                                                                                                                                                                      

| | (i)  | different to that in which it previously hadeffect; or 
| | ---- | -------------------------------------------------------
| |      |                                                        
| | (ii) | different to that in which it was taken to have effect:

| |     |                                                                                                                               
| | --- | ------------------------------------------------------------------------------------------------------------------------------
| | (A) | for the purpose of determining the Adjustment Factor; or, as the case may be,                                                 
| |     |                                                                                                                               
| | (B) | in determining whether the Adjustment Factor should be changed (and if so what change should be made to the Adjustment Factor)
|



| | but so that nothing in subparagraphs (a) to (g) above shall apply so as to include:
| | ------------------------------------------------------------------------------------
| |                                                                                     
| |                                                                                     
|



(ii)          those sections

| | to the extent in either case that they require the Appointee to pay fees or charges to the relevant enforcement authority;and
| | -----------------------------------------------------------------------------------------------------------------------------

| |    
| | ---
| | (2)
|



|13.3 | In paragraph 14 and in the definition of a "Relevant Change of Circumstance":
|---- | -----------------------------------------------------------------------------



| | (1) | references to costs include references to expenditure and loss of revenueand references to costs being incurred include references to
expenditurebeing made and loss of revenue being suffered;                                                                                                                                                                                                                                                                                            
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
| |    
| | (2) | references to receipts include references to receipts, cash or other assets of any sort, whether of a capital orrevenue nature and
including receipts of grants, contributions, gifts and loans; and                                                                                                                                                                                                                                                                                       
|
| |    
| | (3) | without prejudice to subparagraph (1) above, "Operating Expenditure" in subparagraph 14.2(6) includes thoseitems currently so
identified in Regulatory Accounting Guidelines 3 and 4 and in the July Return 1999 ReportingRequirement, line 22 in table 21 and line 23 in table 22. For the avoidance of doubt, depreciation, the write-down/off of assets, the profits/loss on
disposal of assets and infrastructure renewals expenditure or charges areexcluded (effective 29 July 2000).
|
|
|
|



|13.4 | (1)   For the purposes of sub-paragraphs 14.2(1) costs, receipts and savings shall be
ascertained at the general price level prevailing, or expected to prevail, on 30 September in the year in which the Appointee gives notice under subparagraph 14.1, or the director gives notice under paragraph 15.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|     | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | In subparagraphs 14.2(8) and 14.2(9) and subparagraph (3) below "at Outturn Prices", in relation to the amount of any Base Cash Flow or depreciation, means that
amount as adjusted to take account of the actual or expected cumulative percentage change in the Retail Prices Index from that prevailing, or expected to prevail, on 30 September in the year in which the Appointee gives notice under subparagraph
14.1 or the Director gives notice under [sub] paragraph 15 [.1], up to and including that prevailing, or expected to prevail, on 30 September in the year in which the Base Cash Flow or depreciation occurred, or is expected to occur.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|
|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | In subparagraph 14.2(8) "Current Value", in relation to any Base Cash Flow or depreciation at Outturn Prices, means that amount, as adjusted to take account of the actual
or expected cumulative percentage change in the Retail Prices Index from 30 September in the year in which that Base Cash Flow or depreciation occurred or is expected to occur, up to and including 30 September in the relevant year.                                                                                                                                                                                                                                                
|
|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|13.5 | For the purpose of section 15(5)(b) (section 13(5)(b) of the 1991 Act), the provisions of this Condition, to the extent that they relate to a Relevant Change of Circumstance falling within sub
paragraph (2) of that definition, are provisions of the Appointments which cannot be modified. This subparagraph shall cease to have effect if, but only if, this Condition ceases to contain any provision relating to changes to the Adjustment Factor
to allow for Notified Items and Relevant Changes of Circumstance











|14.  | References to the Director relating to Notified Items and Relevant Changes of Circumstance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|14.1 | The Appointee may from time to time refer to the Director for determination by him (having considered the proposals of the Appointee) the questions set out in subparagraph 14.2. Such reference shall be made by notice
given to the Director, which, in the case of the questions set out in subparagraph 14.2shall be given in accordance with subparagraph 14.4. For the purposes of subparagraph 14.2 a single reference may be made in respect of any number of Notified Items and
Relevant Changes of Circumstance and subparagraph 14.2 shall be construed accordingly."
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|14.2 | In the case of a Notified Item or where there has been or is to be a Relevant Change of Circumstance all of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
|



| | (2) | except in the case of a Relevant Change of Circumstance falling within subparagraph(2) of the
definition, to whatextent:
| | --- | -------------------------------------------------------------------------------------------------------------------------
|



| | (a) | are the costs determined under (1) reasonably recoverable through charges for services provided,functions carried out by, and other
activities of, the Appointee in its capacity as a water undertaker orsewerage undertaker which are not Standard Charges for Basket Items (not being Excluded Charges);           
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
| |    
| | (b) | in the case of receipts and savings, is the Relevant Item relevant to services provided, functions carriedout by, and other
activities of, the Appointee as a water undertaker or sewerage undertaker which are notBasket Items in respect of which the Appointee makes Standard Charges (not being Excluded Charges)
|
|

| |                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | and where it is determined that such costs are reasonably recoverable as aforesaid or, as the case may be, that theRelevant Item is
relevant as aforesaid, either in full or to an extent, then references hereafter to costs, receipts andsavings reasonably attributable to a Relevant Item are to those costs, receipts and savings except to that extent;
|
|
| |                                                                                                                                                                                                                                                                                                                                                              
| | (3)                                                                                                                                                                                                                                                                                                                                                          

| |    
| | ---
| | (a)
|
|
| |    
| | (b)
|
|
|

| | and for the purpose of determining the separate amounts under (a) and (b), but without prejudice to the generality of the foregoing:
| | ------------------------------------------------------------------------------------------------------------------------------------



| | (i) | no account shall be taken of:
| | --- | -----------------------------
| |     |                              
| |     | (A)                          



| |  | (B) | any costs, to the extent that they would have been, or would be, avoided by prudent management action taken since the transfer date (and for this purpose what constitutes
"prudent management action" shall be assessed by reference to the circumstances which were known or which ought reasonably to have been known to the Appointee at the relevant time);                               
| |  | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|
| |  | (C) | any savings achieved by management action taken since the transfer date over and above those which would have been achieved by prudent management action (and for this purpose what
constitutes "prudent management action" shall be assessed by reference to the circumstances at the relevant time); or                                                                                      
|
|
|
|
| |  | (D) | any amounts attributable to matters allowed for in making a Relevant Determination, except to such an extent that such amounts otherwise fall to be taken into account as
amounts reasonably attributable to, or connected with, the Relevant Item under this subparagraph (3) and subparagraph (1) by virtue of the definition of a Notified Item and a Relevant Change of Circumstance; and



| | (ii) | in the case of a Relevant Change of Circumstance falling within subparagraph (1) of the definition, regard shall be had to whether either:
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------



| |  | (a) | the Secretary of State has notified the Director of any change of policy, concerning any environmental or waterquality standard, which has been made since Adjustment Factor was last
determined or          
| |  | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |     |                                                                                                                                                                                                               
| |  | (b) | the Appointee has itself given notice to the Director of the application to it of, or any change to, any legal requirement, before referring that legal requirement to the Director under sub
paragraph 14.1;



|(4) | having determined under (3) the separate amounts of costs and of receipts and savings in respect of each Relevant Item, what are the annual cash flows thereof (costs being netted off
against the amount of receipts and savings for this purpose) over each Charging year included in the timing determined under (3) (those annual cash flows being hereinafter referred to as "the Base Cash Flows");
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|



|(5) | what is the annual aggregate of:
|--- | --------------------------------



| | (a) | one half of the Base Cash Flows in respect of Relevant Changes of Circumstance falling within subparagraph (2) of that definition; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                        
| | (b) | the Base Cash Flows in respect of all other Relevant Changes of Circumstance and Notified Items                                        
|







|    | in both cases the subject of the notice or notices under subparagraph 14.4 or paragraph 15;                                                                                                                                                                                                                                                                                                                                      
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(6) | (a) where any Base Cash Flows under (5) consist of items to which (b) below does not apply, what is the Net Present Value of those Base Cash Flows calculated up to the start of the first of the Charging Years
for which the next Periodic Review falls to be carried out:                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | (b) where any Base Cash Flows under (5) consist of loss of revenue and/or Operating Expenditure, what is the Net Present Value of those Base Cash Flows calculated over 15 years                                                                                                                                                                                                                                                  
|    | and what is the aggregate of those Net Present Values calculated under (a) and (b) ("the Materiality Amount"); (effective 29
July 2000)                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(7) | is the Materiality Amount equal to or does it exceed ten per cent of the turnover attributable to the Appointed Business in the latest financial year for which accounting statements have been prepared and
delivered to the Director under Condition F, as shown by those accounting statements, and for this purpose where the Materiality Amount is a negative figure it shall be treated as though it were a positive figure;
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(8) | if so, for each year ("the relevant year") until the first of the Charging Years for which the next Periodic Review falls
to be carried out (having regard to any Review Notice or Reference Notice which has been given at the time when the reference is made),                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                   



| |       | the relevant year lessthe sum ofthe Current Value of all Allowable Depreciation occurring up to and including the relevant year
("Allowable Net Asset Value");         
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (vi)  | the sum of the Current Valueof all Allowable Infrastructure Asset Expenditure occurring up to and including the relevant year ("Allowable Infrastructure Asset Value");
|
| | (vii) | the Appropriate Discount Rate, adjusted so as to exclude any allowance for changes in theRetail Price Index, multiplied by the sum of:                                         
|

|    
|----
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|14.3
|    
|14.4



|                                                                                                                                                                                                                                                                                                                                                          | which the Reference Notice is given and, unless the Director otherwise consents, shall be given not later than:           
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|15.                                                                                                                                                                                                                                                                                                                                                       | Changes to the Adjustment Factor initiated by the Director relating to Notified Items and Relevant Changes of Circumstance
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|In the case of a Notified Item or where any Relevant Change of Circumstance has occurred or is to occur, the Director may, having given notice to the Appointee specifying the Notified Item or, as
the case may be, the Relevant Change of Circumstance, of his intention so to do not later than:                                                      
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                          | (1)                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                          | (2)                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|determine the questions set out in subparagraph 14.2 in respect of that Notified Item or, as the case may be, that Relevant
Change of Circumstance. A single notice may be given under this subparagraph 15[. 1] in respect of any number of Notified Items and Relevant Changes of Circumstance and subparagraph 14.2 shall
be construed accordingly.
|                                                                                                                                                                                                                                                                                                                                                         
|Where subparagraph 14.4(2) or 15(2) applies, the questions set out in (5) to (9) inclusive of subparagraph 14.2 shall be determined in respect of all Notified Items and Relevant Changes of Circumstance in respect of which the Appointee and the Director have given notice, taken as a whole.                                                      
|                                                                                                                                                                                                                                                                                                                                                         
|Part V References to the Competition Commission and Modification of this Condition                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|16.                                                                                                                                                                                                                                                                                                                                                       | References to the Competition Commission                                                                                  
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                          | Where:                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                          | (1)                                                                                                                       

| | (2) | following a reference under paragraph 14, the Director has not given notice to the Appointee of his determinations (including any determinations under paragraph 15 which fall to be taken
into account in determining the questions the subject of the reference under paragraph 14) within 3 months from the date of the relevant Reference Notice; or
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                         

| | (3) | the Appointee disputes any determination made by the Director under Part III or Part IV of this Condition.
| | --- | ----------------------------------------------------------------------------------------------------------

the Appointee may, by notice given to the Director within:

| | (a) | 13 months from the Review Notice Date or, in the case of a reference under paragraph 11, from the date of the relevant Reference Notice (in the cases referred to in subparagraph (1));
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                         
| | (b) | 4 months from the date of the relevant Reference Notice (in the case referred to in subparagraph (2)); or                                                                              
| |     |                                                                                                                                                                                         
| | (c) | 2 months from the date on which the Director gives notice of his determination to the Appointee (in the case referred to in subparagraph (3))                                          
| |     |                                                                                                                                                                                         

|require the Director to refer to the Competition Commission for determination by it:
|------------------------------------------------------------------------------------
|                                                                                    
|                                                                                    

| | (ii) | in any case referred to in sub-paragraph (3) the disputed determination.
| | ---- | ------------------------------------------------------------------------

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|17.      | Modification of this Condition following Periodic Reviews and references to the Director or the Competition Commission                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|17.1     | Except in the case of a Periodic Review carried out under paragraph 11, this Condition shall be modified by the change (if any) to the Adjustment Factor (which may be a different number
for any Charging Year and may be a positive or negative number, or zero) necessary to give effect to any determination made by the Director or the Competition Commission under, or, as the case may be, following a reference under, Part III, Part IV or Part
V of this Condition.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|17.2     | Where the Appointee requires the Director to make a reference to the Competition Commission under paragraph 16 in the case referred to in subparagraph (3) of that paragraph this
Condition shall be modified by the change (if any) to the Adjustment Factor necessary to give effect to the Directors determination but so that subparagraph 17.1 shall then apply to the determination made by the Competition Commission
following such reference.                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Part VI. | Provision of Information to the Director                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|18.1     | The Appointee shall furnish to the Director:                                                                                                                                                                                                                                                                                                                                                                                                                                  

|     | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                | not later than 30th September immediately following the date of the Reference Notice (in the case of a reference under paragraph 11);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                | at the time when it gives the relevant Reference Notice to the Director (in the case of a reference under paragraph 14 falling within subparagraph 14.4(1);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | (4)                                                                                                                                                                                                                                                                                                                                                                                                                                | as soon as reasonably practicable and in any event not later than the expiry of one month from the date of the Director's notice to the Appointee under paragraph 15 (in the case of such a
notice, including the case of a reference under paragraph 14 falling within subparagraph 14.4(2))                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | such Information as the Appointee reasonably believes is necessary or, as the case may be, as the Director may reasonably require in his said notice, to enable the Director to
make his determination. The Appointee shall also furnish to the Director as soon as reasonably practicable such further Information as the Director may from time to time by notice to the Appointee reasonably require to make his determination.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|18.2 | The Appointee shall also furnish to the Director from time to time when so requested by the Director such Information as the Director may reasonably require to decide whether
or not to make determinations under paragraph 15.                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|18.3 | Any Information furnished to the Director under this paragraph 18 or under paragraph 9 shall, if the Director so requires to make his determination, be reported on by a person
appointed by the Appointee and approved by the Director (such approval not to be unreasonably withheld) ("the Reporter").                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|18.4 | The Appointee shall enter into a written contract of engagement with the Reporter which shall:                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                | where such a report is required by the Director under subparagraph 18.3, require the Reporter to prepare and furnish to the Director, and separately to the Appointee, a written
report addressed jointly to the Director and the Appointee in form and substance such as may be specified by, or consistent with any guidelines specified by, the Director at the time when he requires the report to be furnished, the matters so specified
being reasonably appropriate to enable the Director to make his determination (to the extent that the Information in respect of which that report is required to be prepared and furnished is relevant to that determination); and
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                | include a term that the Reporter will provide such further explanation or clarification of his report as the Director may reasonably require and such further Information in respect of, or
verification of, the matters which are the subject of his report as the Director may reasonably require.                                                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     | The contract of engagement may also include provisions requiring the Reporter, his employees and agents to keep confidential and not to disclose, except to the Director or as
required by law, any Information which the Reporter obtains in the course of preparing his report.                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|18.5 | The Appointee shall cooperate fully with the Reporter to enable him to prepare his report, including without limitation, so far as is necessary for that purpose:                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                | subject to reasonable prior notice to the Appointee, giving to the Reporter access at reasonable hours to anyRelevant Plant and to any premises occupied by the Appointee in relation to the Appointed Business; and                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| | (2) | subject to reasonable prior notice to the Appointee, allowing the Reporter at reasonable hours:
| | --- | -----------------------------------------------------------------------------------------------
| |     |                                                                                                
| |     | (a)                                                                                            
| |     |                                                                                                
| |     | (b)                                                                                            
| |     |                                                                                                
| |     | (c)                                                                                            
| |     |                                                                                                

|18.6 | Nothing in sub-paragraph 18.5 shall require the Appointee:
|---- | ----------------------------------------------------------
|     |                                                           
|     | (1)                                                       
|     |                                                           
|     | (2)                                                       
|     |                                                           
|18.7 | In sub-paragraphs 18.4 and 18.5:                          

| |     |                                                                                                                                                                                                         
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | references to the Reporter include references to his employees and agents; and                                                                                                                          
| |     |                                                                                                                                                                                                         
| | (2) | "Relevant Plant"means any plant used by the Appointee for the purpose of carrying out the Regulated Activities including, without limitation, water mains, sewers and other pipes and their accessories.



Condition C: Infrastructure Charges

THIS MODIFICATION MADE ON 21 FEBRUARY 1996

COMING INTO EFFECT ON 22 FEBRUARY 1996

|1   | Interpretation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | In this Condition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|1.1 | "Infrastructure Charge" means a Water Infrastructure Charge or a Sewerage Infrastructure Charge;                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|1.2 | "House" means any building or part of a building which is occupied as a private dwelling house or which, if unoccupied, is likely to be so occupied and,
accordingly, includes a flat;                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|1.3 | "Common Billing Agreement" means an agreement between the Appointee and any other person under which that person has undertaken to pay, on terms agreed between them
charges for water supply or sewerage services, or both, in respect of two or more Houses which have a common Supply Pipe and which, in any case where that agreement relates to one of those services only, are also subject to a similar agreement for common
billing between that person and the undertaker providing the other service;
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|1.4 | "Relevant Multiplier" means a number (which may be one or more or less than one) calculated in the manner set out in the Appendix to this Condition;                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|1.5 | "Standard Amount", in relation to any Infrastructure Charge, means the amount of that charge specified in subparagraph 2.1.3, as adjusted pursuant to sub
paragraph 2.2 (in respect of any Charging Year starting on or after 1st
April 1996);                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|1.6 | "Supply Pipe" means any part of a service pipe which a water undertaker could not be, or have been required to lay under section 42 of the section 46(2)&(3) of the
1991 Act 1): and                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|1.7 | references to a connection are to such a connection as is mentioned in section 79(2)(a) or (b) of the Act (section 146 of 1991 Act), [and references to the Appointee include, where
appropriate, references to the Water Authority].

Note: the words in square brackets are omitted from the water only Licence.                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|2   | Level of Infrastructure Charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|2.1 | Subject to the following provisions of this Condition, in respect of each Charging Year starting on or after 1st
April 1995, the amount of any Infrastructure Charge shall be                                                                                                                                                                                                                                                                                                                                 

| | 2.1.1 | in the case of a House subject to a Common Billing Agreement, the Standard Amount multiplied by the Relevant Multiplier for that house;                                                                                                                                                                                               
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                       
| | 2.1.2 | in the case of premises which do not consist in a House or Houses and to which water is provided by a Supply Pipe with an internal diameter larger than the standard size for the time
being adopted by the Appointee for new connections of Houses, the Standard Amount multiplied by the Relevant Multiplier for those premises; and
| |       |                                                                                                                                                                                                                                                                                                                                       
| | 2.1.3 | in the case of any other premises                                                                                                                                                                                                                                                                                                    
| |       |                                                                                                                                                                                                                                                                                                                                       
| |       |                                                                                                                                                                                                                                                                                                                                       

|      |                                                                                                                                                                                                                                   
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.2   | In respect of each Charging Year starting on or after 1st
April 1996                                                                                                                                                             
|      |                                                                                                                                                                                                                                   
|2.2.1 | the amounts specified in sub-paragraph 2.1.3 shall be adjusted by the percentage of any change in the Retail Prices Index between that published for the month of November in the Prior
Year and that published for November 1994;
|      |                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                   
|      | and                                                                                                                                                                                                                               

|    |                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 2.2.2                                                                                                                                                                                                                                                                                                                                                                                             | subparagraph 415.2 of Condition B shall apply to this Condition as if the reference in it to the Charges Limit were a reference to the
Standard Amount.Note: 4.2 in Water Only Licence, 5.2 in Water and Sewerage Licence
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                           
|3.1 | Subject to subparagraph 3.2, where an amount has been paid or agreed to be paid to the Appointee on account of works which have been allowed for in determining the limits on
Infrastructure Charges under the Appointment, that amount shall, to the extent that it is actually paid and is referable to a connection, count towards the level of charge for that connection under paragraph 2.
|    |                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                           
|3.2 | Where any such amount referable to a connection is greater than the level of charge for that connection under paragraph 2, nothing in this Condition shall preclude the Appointee from
retaining or recovering the greater amount.                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                           
|4.  | Where, prior to 1st
April 1990 the Appointee has entered into an agreement under which a person has agreed to pay an amount in respect of works referable to a connection and that amount is greater than the amount which would otherwise be charged pursuant to paragraph 2,
nothing in this Condition shall preclude the Appointee from recovering the greater amount.                        
|   
|    |                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                           
|5.1 | Subject to subparagraph 5.2, where a site is developed or redeveloped (including by means of conversion of a building or buildings on it) the total                                                                                                                                                                                                                                             



|    | amount of Water Infrastructure Charges or, as the case may be, Sewerage Infrastructure Charges which may be recovered in respect of Houses and other premises on the site resulting from the
development or redevelopment shall not exceed the Standard Amount multiplied by X, where X equals 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                 
|    | (1)                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                 
|    | (2)                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                 
|5.2 | For the purpose of calculating the amount of the limit imposed by this paragraph                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                 
|    | (a)                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                 
|    | (b)                                                                                                                                                                                                                                                                                             



|6.1 | Subject to subparagraph 6.2, where 
|--- | -------------------------------------
|    |                                      
|    | (a)                                  
|
|
|    |                                      
|    | (b)                                  
|
|    |                                      

|    | nothing in this Condition shall preclude the Appointee from recovering, whether from that person or from the occupier of each House subject to the agreement, Infrastructure Charges in
respect of that house at the Standard Amount
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                     
|6.2 | Whenever it takes advantage of subparagraph 6.1, the Appointee shall give credit for any amount already paid by way of Infrastructure Charges in respect of that House
for the connection concerned.                               
|

|    |                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|7.  | Paragraph 2 does not apply to the interest element of any installment Amount payable in accordance with Condition D.                                           
|    |                                                                                                                                                                
|8.1 | Nothing in this Condition precludes the Appointee from charging less in any particular case than the level of Infrastructure Charge applying under paragraph 2.
|

|    |                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8.2 | Nothing in this Condition restricts the recovery or amount of any expenses or charges recoverable otherwise than under section 79 of the Act (section 146 of 1991 Act) or
(except of and to the extent that subparagraph 3.1 applies to the amount) restricts the recovery or level of any Infrastructure Charge by reference to any such amount.
|
|

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|9.  | Notification to Sewerage Undertakers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Where the Appointee makes a connection or connections to premises in respect of water supply services, it shall as soon as reasonably practicable inform any sewerage
undertaker which provides services to those premises of the number of premises connected, the date or dates of connection, the address of the premises, the name and address of the person(s) responsible for payment of charges for the supply of water to the
premises and (if different) of the person(s) responsible for payment of Infrastructure Charges in respect of the premises and (where appropriate) the Relevant Multiplier(s) for the premise.
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10. | Arbitration                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|    | If, in any case to which a Relevant Multiplier applies, there is any dispute between the Appointee and the person on whom any Infrastructure Charge has been levied about the
calculation of the Relevant Multiplier, or the number or type of fittings on which that calculation is based, it may be referred by either party for determination by the Director.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                  
|11. | Periodic Review of Level of Infrastructure Charges                                                                                                                                                                                                                                                                                                               



|11.1 | Where a Periodic Review is to be carried out under paragraph 7/8 or 9 of Condition B, the Appointee may, by notice given to the Director in relation to water or sewerage
connections or both, refer to the Director, for determination by him, the question whether any (and if so, what) change to the Standard Amount or the manner of calculation of any Relevant Multiplier should be made for the 10 consecutive Charging Years to
which that review relates.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|11.2 | Where a Periodic Review is to be carried out under paragraph 7/ 8 or 9 of Condition B, the Director may, after giving notice to the Appointee in relation to water or sewerage
connections or both, determine the question specified in subparagraph 11.1.Note: lower numbers in Water Only Licence; higher ones in Water and Sewerage Licence                                                                                                                    
|
|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|11.3 | Notice under subparagraph 11.1 or 11.2 shall be given not later than 30 days after the Review Notice Date for the Periodic Review concerned.                                                                                                                                                                                                                                                                                                                      
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|12.  | Interim Review of Level of Infrastructure Charges                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|12.1 | The Appointee may, by notice given to the Director in relation to water or sewerage connections or both, refer to the Director, for determination by him, the question whether
any (and if so, what) change to the Standard Amount or the manner of calculation of any Relevant Multiplier should be made, in respect of the Subsequent Period, in order to ensure that                                                                                           
|
|
|

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | in each Charging Year in that period, the aggregate number of water, the case may be, sewerage connections made by the Appointee Infrastructure Charges or, as the
case may be, Sewerage Infrastructure Charges as the aggregate number of such connections assumed by the Secretary of State for that year in setting the initial level of those charges under this Condition bears to the aggregate revenue so assumed by him; and
|
|
|
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (b) | over the Subsequent Period any shortfall in (or excess of) revenue from Infrastructure Charges in any Charging Year in the Prior Period, compared with the revenue so assumed
for that year, is recovered (or, as the case may be, carried forward as a credit) to the extent attributable                                                                                                                                          
|
|

|     |                                                                                                                                                                                                                                                                                                                         | 
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|12.1 | In subparagraph 12.1 "the Subsequent Period" means the period from 1stApril immediately following the Charging Year in which the Review at the first 5yearly interval, 31st
March 2000) and "the Prior Period" means the period from 1st
April 1991 until the end of the Charging Year in which the reference is made
|
|

|12.3 | The Director may, after giving notice to the Appointee in relation to water or sewerage connections or both, determine the question specified in subparagraph 12.1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|12.4 | Notice under subparagraph 12.1 or 12.3 may be given not more than once in any Charging Year and not later than 31st
December.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|13.  | Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|13.1 | The Appointee shall furnish to the Director, at the time when it gives notice to him under subparagraph 11.1 or 12.1, such Information as the Appointee reasonably
believes is necessary to enable the Director to make his determination. The Appointee shall also furnish to the Director, after receipt by it of notice given under subparagraph 11.2 or 12.3 or this subparagraph, such further Information,
specified in the notice, as the Director may reasonably require to make his determination.                                                                                                                                                                                          
|
|
|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|13.2 | The Appointee shall also furnish to the Director from time to time, when so requested by him, such Information as he may reasonably require, to decide whether or not to give
notice under subparagraph 11.2 or 12.3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|13.3 | Any Information furnished to the Director under this paragraph shall, if the Director so requires to make his determination, be reported on by a person ("the
Reporter") appointed by the Appointee and approved by the Director (such approval not to be unreasonably withheld). The provisions of subparagraphs 17/4, 17/5(2), 17/6 and 17/7(l) of Condition B shall apply to the engagement and terms of reference of
each Reporter appointed pursuant to this Condition as they apply to those of each Reporter appointed pursuant to that Condition, save that the reference in subparagraph 17/4(l) to subparagraph 17/3 of that Condition shall be taken as a
reference to this subparagraph.
|
|
|
|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|14.  | References to the Competition Commission                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | Where 
| | -------
| | (1)    
|
| |        
| | (2)    
|
| |        
| | (3)    



| | the Appointee may, by notice given to the Director within 
| | -----------------------------------------------------------
| |                                                            
| | (a)                                                        
| |                                                            
| | (b)                                                        
| |                                                            
| |                                                            
| | (c)                                                        
|

|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|    | require the Director to refer to the Competition Commission, for determination by it 
|    |                                                                                       
|    | (i)                                                                                   
|    |                                                                                       
|    | (ii)                                                                                  
|    |                                                                                       
|15. | Modification of this Condition                                                        

|     |                                                                                                                                                                                                                                                                                                                     
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|15.1 | This Condition shall be modified by the change (if any) to the Standard Amount or the manner of calculation of any Relevant Multiplier, necessary to give effect to any
determination made by the Director or the Competition Commission under, or, as the case may be, following a reference under, this Condition.
|
|



|15.2 | Where the Appointee requires the Director to make a reference to the Competition Commission under paragraph 14, this Condition shall be modified by the change (if any) to the
Standard Amount or the manner of calculation of any Relevant Multiplier, necessary to give effect to the Directors determination, but so that subparagraph 15.1 shall then apply to the determination made by the Competition Commission following
that reference.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|

|     |                                                                
|---- | ---------------------------------------------------------------
|15.3 | In this paragraph "this Condition" includes the Appendix to it.

APPENDIX

CALCULATION OF RELEVANT MULTIPLIER

|1. | To calculate the Relevant Multiplier for a House to which subparagraph 2.1.1 of Condition C applies:
|-- | -----------------------------------------------------------------------------------------------------
|   |                                                                                                      
|   | 1.1                                                                                                  
|
|
|   |                                                                                                      
|   | 1.2                                                                                                  
|
|   |                                                                                                      
|   | 1.3                                                                                                  
|

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------
|   | 1.4                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | the resulting number, will be the Relevant Multiplier.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2. | To calculate the Relevant Multiplier for premises to which subparagraph 2.1.2 of Condition C applies, ascertain in respect of the premises the total number of water
fittings in all the categories specified in column 1 of the Table below; calculate by reference to column 2 of the Table the aggregate loading units attributable to that total number of water fittings; Multiplier, provided that if the resulting number is
less than 1, the Relevant Multiplier will be 1.
|
|
|

|TABLE                                                                                      
|-------------------------------------------------------------------------------------------
|                                                                                           
|Column I                                                                                   
|Water Fitting (note I)                                                                     
|                                                                                           
|WC flushing cistern                                                                        
|Wash basin in a House                                                                      
|Wash basin elsewhere 3                                                                     
|Bath (tap nominal size %in 120 mm)(note 2)                                                 
|Bath (tap nominal size larger than %in 120 mm (note 2)                                     
|Shower 3 Sink (tap nominal size 1/2 in/l5 mm)                                              
|Sink (tap nominal size larger than 1/2 in/l5 mm)                                           
|Spray tap                                                                                  
|Bidet                                                                                      
|Domestic appliance (subject to a minimum of 6 L. U. s per House  (notes 3 &4)             
|Communal or commercial appliance (note 3)                                                  
|Any other water fitting or outlet (including a tap but excluding a urine or water softener)

Notes to be read with the Table:

|1 | Reference to any fitting includes reference to any plumbing, outlet, dedicated space or planning or other provision for thatfitting;                                                                                                                                                                                                                                                                            
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|2 | "Bath" includes a whirlpool bath and a jacuzzi;                                                                                                                                                                                                                                                                                                                                                                 
| 
|3 | "Domestic appliance" means an appliance (including a dishwasher, a washing machine and waste disposal unit) in a Houseand "communal or commercial appliance" means an appliance (including a dishwasher, a washing machine and a wastedisposal unit) elsewhere than in a House (including in communal facilities);                                                                                              
|
|
|  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4 | In any calculation under paragraph 1, a minimum of six loading units shall be included, in respect of each House, for domesticappliances (whether or not the House has any such appliances)except, in the case of any House, where neither a washingmachine nor a dishwasher can be provided (and there is no plumbing, outlet,
dedicated space or planning or other provisionfor either appliance)in the House;
|
|
|
|  |                                                                                                                                                                                                                                                                                                                                                                                                                 
|5 | In the case of any premises with a sewerage only connection and no water fittings, the Relevant Multiplier will be one.                                                                                                                                                                                                                                                                                         

Condition C:  Infrastructure Charges

Explanatory Note

(This note does not form part of the Condition and does not affect the interpretation of it)



|1. | Section 79 (2)of the 1989 Water Act (section 146 of 1991 Act) introduced a power whereby water and sewerage undertakers couldlevy a charge for the initial connection of premises to a water supply or to a public sewer for domestic purposes. These charges, which were first levied from 1 April 1990, are termed "
infrastructure charges". They relate to the additional capital expenditurecosts incurred by undertakers in extending the network of reservoirs, mains, sewers and treatment works, and developingother resources,
to provide capacity for new customers.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|2. | This condition places limits (which are different for each company) on the amount of infrastructure charges for each water or sewerageconnection. It also contains provisions for adjusting charges. The Condition is structured as follows:                                                                                                                                                                                                                                                                                                                                   
|

|
|
|
|
|
|
|
|
|
|
|

|   | The Condition applies only to the charges under section 79 (2), (section 146 of 1991 Act) and does not apply for example, to amounts recoverable under sections 41, 42 or 72 of the 1989
Act (section 42, 45, 99 & 100 of 1991 Act), or s. 36 of the Public Health Act 1936, or any local enactment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3. | The intention of the Condition, in placing a limit on infrastructure charges levied in different situations, is to reflect broadly the expected additional load placed on the
system by different categories of property. In the case of houses and flats with a common supply pipe and subject to a common billing agreement for water supply and sewerage services, and in the case of properties (other than houses and flats) served by
pipes larger than the standard size, the standard charge set out in paragraph 2 is increased by a multiplier reflecting estimated loadings. The basis on which these loadings are to be calculated is set out in the Appendix to the Condition. Paragraph 2
also provides for the levels of charge to be adjusted annually by the change in the retail prices index.
|
|
|
|
|
|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4. | Paragraphs 3 and 4 deal with cases where an amount has been agreed to be paid in respect of a connection which meets (wholly or inpart) the cost of infrastructure related to
the connection.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|5. | Where a site is redeveloped or a building is converted paragraph 5 provides that credit shall be given for the number of premises on the site in the five years beforehand, in
calculating the limit on infrastructure charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|6. | Paragraph 6 provides that, where infrastructure charges are calculated on the basis of the multiplier in cases where a Common Billing Agreement exists, and either they are not
paid in full within 14 days of the date of the connection, or the agreement is terminated prematurely by the customer, charges can be recovered at the standard rate.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|7. | Under paragraph 11 the levels of infrastructure charges can be reviewed at the same time that the K factor specified in Condition B is reviewed. Paragraph 12
provides for interim determinations up to the first Periodic Review, to ensure that the average charge per connection remains at the level originally intended, taking account of fresh information about the mix of connections and their relative loadings.                                                                                                                                                                                                                                                                                                                                                                                     
|
|
|

|8. | Paragraph 10 provides for arbitration by the Director General where there is a dispute about the calculation of the multiplier in cases where one applies.                                                                                                                                                                                                                                                                                                                                                                                        
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|9. | The revised Condition (and especially the three possible bases for calculating charges  see Paragraph 3 above)will have the effect that individual charges should more
nearly reflect the differing estimates of additional demand, for new capacity upon the undertakers systems, which arise from the domestic element of various types of development. In order to assess the extent to which this is achieved, the Director
General will collect, from each undertaker, information about numbers and types of connections in each category.
|
|
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|

Condition D: Charges Schemes

|1. | In this Condition:                                                                                                                                                                                                                                                                                                                                            
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|   | "the Installment Amount"means the aggregate amount which would fall to be paid in the relevant
year by way of payments of interest and repayments of capital if an amount equal to the Water Infrastructure Charge or, as the case may be, the Sewerage Infrastructure Charge payable for the relevant connection had been borrowed by the Appointee on terms:
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|   | (1)                                                                                                                                                                                                                                                                                                                                                           
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|   | (2)                                                                                                                                                                                                                                                                                                                                                           
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|2.1 | It shall be the duty of the Appointee to ensure that at all times on and after the relevant date specified in subparagraph 2.2 there is in effect a charges scheme in
accordance with section 76 by which (section 143 of 1991 Act)                                                                                                                                                                                                                     
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                               
|(1) | it fixes the charges to be paid for supplies of water for domestic purposes and for the drainage for domestic purposes of premises except where such charges are determined by
or in accordance with such an agreement as is referred to in section 75 (including any such agreement made or entered into by the Water Authority under section 30 of the 1973 Act as, in accordance with a scheme under Schedule 2, is transferred to the
Appointee); and
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                               
|(2) | it fixes the charges to be paid for such connections as are described in section 79(2) (section 146 of 1991 Act)                                                                                                                                                                                                                                                                                                                                         
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|2.2 | The relevant date for the purpose of subparagraph 2.1(l) is the transfer date and for the purpose of subparagraph 2.1(2) is 1stApril 1990.                                                                                                                                                                                                                                                                                                             
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|3.  | For the purposes of paragraph 2 so much of any such charges scheme made by the Water Authority under section 31 of the 1973 Act as by virtue of paragraph 16(l) of Schedule 26
has effect on and after the transfer date as if it were a scheme made under section 76 (section 143 of 1991 Act). by the Appointee shall be treated as a charges scheme in accordance with section 76 (section 143 of 1991 Act)                                           
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|4.  | Any such charges scheme as is required to be in effect by virtue of subparagraph 2.1(2) shall provide that in the case of a connection to a water supply or, as the case
may be, to a public sewer of a building or part of a building which is occupied as a dwelling house immediately before the connection is made:                                                                                                                                 
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           | (1)           the relevant charges shall be paid in full, within a reasonable period specified by the Appointee after the
connection in respect of which those
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|   |                      | charges are payable is made; or, at the option of the person liable to pay the relevant charges,                                                                                                                                                                                                          
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|   |                      |                                                                                                                                                                                                                                                                                                           
|   |                      | (2)       an amount equal to the installment Amount shall be paid in each of the twelve years following the relevant connection being made,
subject only to that person giving such undertakings to that effect as the Appointee may reasonably require.                                                  
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|5. | The Appointee shall:
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|   | (1)                  | inform persons who enquire about charges for such connections as are described in section 79(2) (section 143 of 1991 Act) that it is required to have in effect a charges
scheme in respect of such charges and of the provisions required to be included in that charges scheme by virtue of paragraph 4;
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|   |                      |                                                                                                                                                                                                                                                                                                           
|   |                      | (2)       make a copy of any such charges scheme as is required to be in effect by virtue of paragraph 2 in its latest form available for
inspection at each Relevant Premises; and                                                                                                                       
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|   |                      |                                                                                                                                                                                                                                                                                                           
|   |                      | (3)       send a copy of any such scheme in its latest form free of charge to any person requesting it.                                                                                                                                                                                                   
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|6. |                      | Nothing in this Condition shall prevent the Appointee from entering into such an agreement as is referred to in section 75 (section 142 of 1991 Act)                                                                                                                                                      
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|Condition E:  Prohibition on Undue Discrimination and Undue Preference and Information on Charges
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| | (2) | for any water supply of sewerage services provided by the Appointee in the course of carrying out its functions or in connection with the carrying out of the Appointees
trade effluent functions payable under any such agreement as is referred to in Section 75 (section 142 of 1991 Act), (including any such agreement made or entered into by the Water Authority under section 30 of the 1973 Act as, in accordance with a scheme
under Schedule 2, is transferred to the Appointee) which are in accordance with standard charges published or fixed by the Appointee;
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| | (3) | fayable where a discharge is made in pursuance of a consent given by the Appointee or, as the case may be, the Water Authority for the purpose of the 1937 Act which are in
accordance with standard charges published or fixed by the Appointee;                                                                                                                                                                                                                                                                                                                              
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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (4) | fetermined by agreement in respect of supply of water for non domestic purposes which are in accordance which standard charges published or fixed by the Appointee;                                                                                                                                                                                                                                                                                                                                                                                                            
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| | (5) | for any water supply or sewerage services provided by the Appointee fixed under any such charges scheme made by the Water Authority under section 31 of the 1973 Act as by
virtue of paragraph 16(1) of Schedule 26 has effect on and after the transfer date as if it were a charges scheme made under section 76 (section 143 of 1991 Act), by the Appointee;                                                                                                                                                                                                                
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| | (6) | for any water supply or sewerage services provided by the Appointee in the course of carrying out its functions or in connection with the carrying out of the Appointees
trade effluent functions payable under any such agreement as is referred to in section 75 (section 142 of 1991 Act), which are not in accordance with standard charges published or fixed by the Appointee;                                                                                                                                                                                          
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| | (7) | payable where a discharge is made in pursuance of a consent given by the Appointee or, as the case may be, the Water Authority for the purposes of the 1937 Act which are not in
accordance with standard charges published or fixed by the Appointee; and
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| |     |                                                                                                                                                                                                                                                           
| | (8) | determined by agreement in respect of a supply of water for nondomestic purposes which are not in accordance with standard charges published or fixed by the Appointee.                                                                                  
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|   | In this paragraph references to standard charges published or fixed by the Appointee are to such charges, whether published or fixed under a charges scheme or otherwise.                                                                                                                                                                                                                                                                  
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|2. | It shall be the duty of the Appointee in fixing or agreeing charges falling within any of subparagraphs l (1)
to l (5) inclusive to ensure that no undue preference is shown 1 to, and that there is no undue discrimination against, any class of customers or potential customers.                                                                                                                                                      
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|3. | It shall be the duty of the Appointee in fixing or agreeing charges falling within any of subparagraphs l
(6)to l(8) inclusive to ensure that no undue preference is shown to, and that there is no undue discrimination against, any customer or potential customer, but so that nothing in this paragraph shall require the Appointee to have regard to any charges
fixed or agreed by the Water Authority prior to the transfer date.  
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|4. | The Appointee shall provide to the Director such Information as the Director may reasonably request in order to satisfy himself that the Appointee is complying with this
Condition, it being acknowledged that Information with which the Director is furnished from time to time under Condition F may not be sufficient or relevant of itself for this purpose.                                                                         
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|5. | The Appointee shall provide to the Director such Information as the Director may from time to time reasonably request about the nature of any supply, service or trade effluent
function made, provided or carried out under any such agreement or consent as is referred to in subparagraphs l (6), l (7) and l(8)and the terms and conditions on which that supply, service or trade effluent function is made, provided or carried out.
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|6. | This Condition shall not apply:                                                                                                                                                                                                                                                                                                                                                                                                            
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|   | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                        
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| |     | (b)                                                                                                                                                                                                                 | continues in force, in accordance with paragraph 16 of Schedule 26, as a scheme made by the Appointee under section 76 (section 143 of 1991 Act);                                                                                                                                                            
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| | (2) | to so much of any such scheme as is made by the Appointee under section 76 (section 143 of 1991 Act), which is approved under the said section 4 and amends any such scheme as is
referred to in subparagraph (1);
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| | (3) | so as to require the Appointee to contravene any local statutory provision;                                                                                                                                        
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| | (4) | to:                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                              
| |     | (a)                                                                                                                                                                                                                 | any such terms or conditions as are determined by the Director or by the Secretary of State (or by a person appointed by either of them) under section 46 (section 55 & 56
of 1991 Act) or, as the case may be, under section 27 of the 1945 Act;                                                            
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| |     | (b)                                                                                                                                                                                                                 | any such conditions as are imposed by the Secretary of State or, as the case may be, the Director under section 61 of the Public Health Act 1961 in respect of any appeal under
section 3 of the 1937 Act; or                                                                                                
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| |     |                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                              
| |     | (c)                                                                                                                                                                                                                 | the provisions included in any notice served by the Secretary of State under paragraph 3(2)of Schedule 9(schedule 123(2) of the 1991 Act) or anything required to be done by
the Appointee under paragraph 4 of Schedule 9 (schedule 123(4) of the 1991 Act) so as to secure compliance with those provisions
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| | (5) | to any Water Infrastructure Charge or Sewerage Infrastructure Charge the amount of which does not exceed the relevant amount specified in Condition C which applies from time to time for
the purposes of that Condition; or
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| | (6) | to any terms and conditions on which any supply of water in bulk is given by the Appointee to another water undertaker.                                                                                                     
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|7. | The Appointee shall not be treated as having fixed or agreed charges for the purposes of paragraph 2 or 3 solely by reason that:
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|   | (1)                                                                                                                             
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|   | (2)                                                                                                                             
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|Condition F : Accounts and accounting information (modified on 28th
September 1996)
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|1.1                                                                                
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|2.1                                                                                
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|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     | (b)               | impounding and pumped raw water storage reservoirs;                                                                                                                  
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|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     |                   |                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     | (c)               | dams;                                                                                                                                                                
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     |                   |                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     | (d)               | sludge pipe lines; and                                                                                                                                               
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     |                   |                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     | (e)               | outfall pipes and other pipes for the conveyance of effluent from any sewage disposal works of the Appointee which discharge directly into the sea or coastal waters;
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|    |                                                                                                                                                                                                                                                               | "infrastructure renewals expenditure"means expenditure on maintaining or restoring the original operating capability,
qualitative performance and condition of infrastructure assets, other than expenditure which is capitalised and routine day to day maintenance expenditure which is charged as an operating cost to the profit and loss account;
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|    |                                                                                                                                                                                                                                                               | "Principal Services"means                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     |                   |                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        | (1)                                                                                                 | water supply; and
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     |                   |                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        | (2)                                                                                                 | sewerage services
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     |                  
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        | and references to a Principal Service are to either and each of water supply and sewerage services;
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     |                  
|    |                                                                                                                                                                                                                                                               | "sewerage        services"includes sewage treatment and disposal and reception, treatment and disposal of trade effluent.                                                                                                                                                                                                                             
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|2.2 | Except where otherwise expressly provided, references in this Condition to costs or liabilities shall be construed as including taxation, and references to any profit and loss account shall
be construed accordingly.                                      
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|2.3 | For the purposes of this Condition:                                                                                                                                                                                                                          
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|    | (1)                                                                                                                                                                                                                                                           | all forms of property shall be assets, whether situated in the United Kingdom or not, including:                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     |                  
|    |                                                                                                                                                                                                                                                               | (a)                                                                                                                                                                                                                                                                                                                                                    | options, debts and incorporeal property generally; and                                             
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     |                  
|    |                                                                                                                                                                                                                                                               | (b)                                                                                                                                                                                                                                                                                                                                                    | any currency including sterling;                                                                   
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     |                  
|    | (2)                                                                                                                                                                                                                                                           | references to the supply of a service include references to anything (including the service of any employee) being made available; and                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                     |                  
|    | (3)                                                                                                                                                                                                                                                           | references to a transfer of an asset or liability include references to a part transfer of an asset or liability and, without limitation, there is a part transfer of an asset
where an interest or right in or over the asset is created.                                                                                                            
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|3.  | .Accounting Records                                                                                                                                                                                                                                          
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|    | The Appointee shall keep proper accounting records in a form which enables the revenues, costs, assets and liabilities of, or reasonably attributable to, the
respective businesses and activities of the Appointee described in this Condition and the other



|    | matters mentioned in this Condition to be separately identified, having regard to the terms of any guidelines notified from time to time by the Director to the Appointee under paragraph
5,6,7, or 8.                                                                                        
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|4.  | Accounting Statements                                                                                                                                                                                                                                                                         
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|4.1 | TheAppointee shall prepare on a consistent basis in respect of each financial year ending after the transfer date accounting
statements which shall comprise, and show separately in respect of each of:                                                                                      
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|    | a profit and loss account, a statement of assets and liabilities and a statement of source and application of funds, together with notes thereto, setting out the revenues, costs (including
depreciation, where charged), assets and liabilities thereof, or reasonably attributable thereto.
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|4A  | The transfer of the assets (including the provision of financial support) to Associated Companies does not adversely affect the Appointees ability to carry out its functions as a
water and a sewerage undertaker or to finance those activities;                                           
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|4.2 | Accounting statements prepared under subparagraph 4.1 shall:                                                                                                                                                                                                                                 
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|5.  | Segmental Information                                                                                                                                                                                                                                                                         
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|5.1 | Accounting statements prepared under paragraph 4 shall show or disclose separately:                                                                                                                                                                                                           
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|    | (1)                                                                                                                                                                                                                                                                                           
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| |     |                                                                                                                                                                                                                                                                                         | (e)                                                                                                                                                                                                                                                                                   | water charges (including abstraction charges and amounts payable for taking supplies of water in bulk)
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| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     |                                                                                                                                                                                                                                                                                         | (f)                                                                                                                                                                                                                                                                                   | local authority sewerage agencies                                                                     
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     |                                                                                                                                                                                                                                                                                         | (g)                                                                                                                                                                                                                                                                                   | materials and consumables                                                                             
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     |                                                                                                                                                                                                                                                                                         | (h)                                                                                                                                                                                                                                                                                   | hired and contracted services                                                                         
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     |                                                                                                                                                                                                                                                                                         | (i)                                                                                                                                                                                                                                                                                   | charges for bad and doubtful debts                                                                    
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     |                                                                                                                                                                                                                                                                                         | (j)                                                                                                                                                                                                                                                                                   | depreciation and amortisation (where charged)                                                         
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     |                                                                                                                                                                                                                                                                                         | (k)                                                                                                                                                                                                                                                                                   | intangible assets written off                                                                         
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     |                                                                                                                                                                                                                                                                                         | (l)                                                                                                                                                                                                                                                                                   | infrastructure renewals expenditure                                                                   
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     |                                                                                                                                                                                                                                                                                         | (m)                                                                                                                                                                                                                                                                                   | exceptional items, and                                                                                
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     |                                                                                                                                                                                                                                                                                         | (n)                                                                                                                                                                                                                                                                                   | on an aggregated basis, all other operating costs.                                                    
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     | The analysis shall include the details reasonably necessary to reconcile the operating costs shown in it with the total operating costs (excluding interest and taxation) of the Appointee
shown in the accounting statements prepared under paragraph 4 in respect of the same period;
| |    
| | (2) | an analysis of total turnover of the Appointed Business showing separately turnover attributable to:                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     | (a)                                                                                                                                                                                                                                                                                     | water supply and, separately on an aggregated basis, sewerage and sewage treatment and disposal (excluding reception, treatment and disposal of trade effluent), distinguishing in each case
between the provision of those services on a measured and unmeasured basis respectively;
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     | (b)                                                                                                                                                                                                                                                                                     | on an aggregated basis, reception, treatment and disposal of trade effluent;                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     | (c)                                                                                                                                                                                                                                                                                     | grants; and                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     | (d)                                                                                                                                                                                                                                                                                     | on an aggregated basis, all other sources;                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| | (3) | an analysis of total tangible fixed assets attributable to the Appointed Business showing separately:                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     | (a)                                                                                                                                                                                                                                                                                     | for each of the items included in the annual accounts of the Appointee prepared under the 1985 Act required to be disclosed under section B of Part I of Schedule 4 to the 1985 Act; or                                                                                              
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     | (b)                                                                                                                                                                                                                                                                                     | for each of the items included in such other analysis of tangible fixed assets by asset type as is disclosed in those annual accounts; and                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                       |                                                                                                       
| |     | (c)                                                                                                                                                                                                                                                                                     | if not separately disclosed in those annual accounts, for infrastructure assets                                                                                                                                                                                                      



|    |                                                                                                                                                                                                                                                                                                                                                                                                                             | amounts attributable to each Principal Service, and as a separate category, on an aggregated basis tangible fixed assets which are not attributable to either Principal Service.                                                                                                                              
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             | The analysis shall include:                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             | (i)                                                                                                                                                                                                                                                                                                           
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             | (ii)                                                                                                                                                                                                                                                                                                          
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             | (iii)                                                                                                                                                                                                                                                                                                         
|
|
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                               
|    | (4)                                                                                                                                                                                                                                                                                                                                                                                                                         | details necessary to reconcile expenditure made or incurred in relation to infrastructure assets with the expenditure made or incurred in relation to Network
Assets during the same financial year as shown in the statement required to be delivered to the Director under subparagraph 5.3 of Condition L.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                               
|5.2 | Accounting statements prepared under paragraph 4 shall show separately for each item relating to sewerage services included in the analyses under subparagraphs 5.1(1) (operating
costs) and 5.1(3) (tangible fixed assets) an analysis between amounts which are attributable to sewerage (including reception of trade affluent) and sewage treatment and disposal (including treatment and disposal of trade effluent).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                               
|5.3 | The Director may, after consulting with such bodies as are reasonably representative of undertakers holding appointments under Chapter 1 of Part II of the Act, or if none, the Appointee,
from time to time by reasonable notice to the Appointee specify in such guidelines as are reasonable and appropriate for the purpose set out in subparagraph l(5), variations of:                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                               
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                         | the matters required to be shown or disclosed under subparagraph 5.1(1) (but not so as to require separate analyses of matters comprised within any of the items listed in that
subparagraph); and                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                               
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                         | the items in respect of which the analysis of total fixed assets is to be prepared under subparagraph 5.1(3)                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                               
|    | and thereafter the Appointee shall show or disclose information under subparagraph 5.1(l) in respect of those matters or, as the case may be, shall prepare the analysis under sub
paragraph 5.1(3) in respect of those items, in each case as so varied from time to time.                                                                                                                                              



|6.  | Transactions entered into by the Appointee or the Appointed Business with or for the benefit of Associated Companies or other businesses or activities of the Appointee                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6.1 | The Appointee shall ensure that every transaction between the Appointed Business and Associated Company (or between the Appointed Business and any other business or activity of the
Appointee) is at arms length, so that neither gives to or receives from the other any cross-subsidy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6.2 | Subject to sub-paragraphs 6.3 to 6.7, accounting statements prepared under
paragraph 4 shall disclose in relation to each transaction of a description specified in the first column of the Appendix to this Condition which took place during the financial year to which those statements relate, the company or, as the case may be,
the business or activity which was party to the transaction with the Appointee or, as the case may be, the Appointed Business or which otherwise benefited from the transaction and the information in relation to that transaction specified in the second
column of that Appendix.                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6.3 | Subject to subparagraph 6.4, any amount required to be disclosed in
relation to a transaction specified in paragraph 3,4,5, or 6 of the Appendix may be aggregated with any amount relating to any other transaction falling within the same paragraph with the same company or other business or activity of the Appointee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6.4 | Subject to subparagraph6.7, if the amount to be disclosed undersubparagraph 6.2 in respect of any single transaction between the Appointee and any Associated Company (or between the Appointed Business and any other business or activity of the
Appointee) exceeds 0.5%of the turnover of the Appointed Business, or , l00,000, whichever is the greater, then that transaction shall not be aggregated under subparagraph 6.3 and the Appointee shall include in any accounting statement prepared under
paragraph 4 the information about that transaction which is specified in the Appendix in relation to a transaction of that kind and which complies with any guidelines issued by the Director for this purpose.                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6.5 | The Appointee shall, when submitting accounting statements prepared under paragraph 4 to the Director, report to him the turnover of any Associated Company with which the Appointed Business
has undertaken any transaction of any kind specified in the Appendix.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6.6 | Nothing in subparagraph 6.2 shall require the disclosure of any information if the aggregate of any amounts required to be disclosed under paragraphs 3,4,5 and 6 of the Appendix
relating to transactions with the same company or other business or activity of the Appointee is not material to the Appointed Business as a whole. For the avoidance of doubt, if the aggregate of such amounts is material to the Appointed Business as a
whole then information shall be disclosed in accordance with this paragraph and the Appendix in relation to each such transaction (subject always to subparagraph 6.3). For the purpose of this subparagraph the question whether an amount is
material to the Appointed Business as a whole shall be determined by the Auditors by reference to whichever is the greater of:
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               



|6.7  | Nothing in this paragraph 6 or the Appendix shall require the disclosure of information which relates solely to a transaction wholly unconnected with the Appointed Business.                                                                                                                                                                                                    
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|6.8  | The Appointee shall not, in respect of any Charging Year make any payments to the Associated Company in respect of the services rendered to the Appointee by that company, which exceeds                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|     | (i)                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|     | (ii)                                                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|6.9  | Without prejudice to paragraphs 6.1 to 6.7 above, the Appointee shall obtain from any Associated Company referred to in paragraph 6.8, such information about the latters costs as the
Director may reasonably require.                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|6.10 | The Appointee shall not, without the consent of the Director and otherwise than in compliance with his directions concerning the valuation of the asset and the treatment of the
consideration in the Appointees accounts, transfer to any Associated Company to which paragraph 6.8 applies any right or asset to which paragraph 3 of condition K of these conditions applies.
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|6.11 | (1)                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|6.11 | (2)                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|
|     |                                                                                                                                                                                                                                                                                                                                                                                  
|6.12 | Without prejudice to the application of paragraphs 6.2 the Appointee shall declare or pay dividends only in accordance with a dividend policy which, in the written opinion of the Director,
will not impair the ability of the Appointee to finance the Appointed Business.                                                                                                     



|(Extract from MD119, 26 July 1996, being the statement of the Directors opinion for the purpose of condition F6.12.                                                                                                                                   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                       
|Licence Modifications                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                       
|North West Water, Dwr Cymru and Southern Water shall declare or pay dividends, only in accordance with a dividend policy which, in the written opinion of the Director, will not impair
the ability of the Appointee to finance the Appointed Business.
|                                                                                                                                                                                                                                                       
|The Principles                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                       
|The written opinion of the Director is that the dividend policy should comply with two basic principles, name/y:                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|RingFencing                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                       
|6A. 1                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|6A. 2A                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                       



|6A. 2B |                                                                                                                                                                                                                                                                                            | (1)                                                                                                                                                                                                  | The Appointee shall when it complies with 6A. 2A, submit with each certificate a statement of the main factors which the Directors have taken into account in giving that certificate.                                                                                                                                                                                                                                                                                     
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|6A. 2B |                                                                                                                                                                                                                                                                                            | (2)                                                                                                                                                                                                  | Without prejudice to paragraph 6A. 3 below, the Directors shall inform the Director in writing as soon as they become aware of any circumstance which causes them to believe that the most
recent certificate under paragraph F6A. 2A could not be repeated in the light of that circumstance.                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|6A. 3  |                                                                                                                                                                                                                                                                                            | (1)                                                                                                                                                                                                  | Not later than 14 days after the directors become aware that the Appointee or any Group Company has embarked (or is proposing to embark) upon any activity which is not one of those
described in subparagraph 6A. l above and which could be material in relation to the Appointees ability to finance the carrying out of the functions mentioned in subparagraph 6A. 1, they shall submit to the Director a certificate in the
terms specified in subparagraph 6A. 4.
|       |                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|6A. 3  |                                                                                                                                                                                                                                                                                            | (2)                                                                                                                                                                                                  | Not later than 14 days after the directors become aware that the Appointee or any Group Company has embarked upon any activity to which subparagraph 6A. 3 (1) applies, they shall submit to
the Director a Certificate in the terms specified in subparagraph 6A. 2.                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|6A. 4  |                                                                                                                                                                                                                                                                                            | Each Certificate under subparagraph 6A. 2A, 6A. 2B or 6A. 3 shall be either                                                                                                                       
|       |                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                            | (1)                                                                                                                                                                                                  | signed by all the directors of the Appointee for the time being, or                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                            | (2)                                                                                                                                                                                                  | approved by a dulyconvened meeting of the board of Directors of the Appointee for the time being, signed (in confirmation of that approval) by a
director or the Secretary of the Appointee and have attached to it a certified copy of an extract of the minutes of the relevant meeting containing the resolution to approve it; and                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                            | (3)                                                                                                                                                                                                  | in the case of each certificate under paragraph 6A. 2A, shall be accompanied by a report prepared by the Appointees Auditors and addressed to the
Director, stating whether they are aware of any inconsistancies between that certificate and either the statements referred to in paragraph 9.3 or any information which the Auditors obtained in the course of their work as the Appointees Auditors
and, if so, what they are.                                       
|       |                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|6A. 5  | The Appointee shall, at all times, conduct the Appointed Business as if it were substantially the Appointees sole business and the Appointee were a separate public limited
company. The Appointee should have particular regard to the following in the application of this condition: 
|       |                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | (a)                                                                                                                                                                                                                                                                                        | the composition of the Board of Appointee should be such that the Directors, acting as such, act independently of the parent company or controlling
shareholder;                                    
|       |                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | (b)                                                                                                                                                                                                                                                                                        | the Appointee must ensure that each of its Directors must disclose, to the Appointee and the Director, conflicts between the duties of the Directors as
directors of the Appointee and other duties;



|    |                                                                                                                                                                                                                                                                                                                                                         | (c)                                                                                                                                                                                                                                      | where potential conflicts exist between the interests of the Appointee as a water and sewerage undertaker and those of other Group Companies, the Appointee and its Directors must ensure
that, in acting as Directors of the Appointee, they should have regard exclusively to the interests of the Appointee as a water and a sewerage undertaker;
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                         | (d)                                                                                                                                                                                                                                      | no Director of the Appointee should vote on any contract or arrangement or any other proposal in which he has an interest by virtue of other directorships. This arrangement should be
reflected in the Articles of Association of the Appointee;                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                         | (e)                                                                                                                                                                                                                                      | the Appointee should inform the Director without delay when:                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          | (i)       a new Director is appointed;                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          | (ii)      the resignation or removal of a Director takes effect; or                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          | (iii)     any important change in the functions or executive responsibilities of a Director occurs.                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          | The Appointee should notify the Director of the effective date of the change and, in the case of an appointment, whether the position is executive or nonexecutive and the nature of any specific function or responsibility; and                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                         | (f)                                                                                                                                                                                                                                      | the dividend policy adopted by the Appointee in the light of paragraph 6.12.                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                        
|7.  | Basis of allocations and apportionments                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|7.1 | The analyses of operating costs and tangible fixed assets prepared under subparagraphs 5.1(1) and 5.1(3) and 5.2 shall give a description of the bases of any apportionments or
allocations of costs and assets and shall be prepared in accordance with any guidelines which may be issued from time to time by the Director under subparagraph 7.3.
|    |                                                                                                                                                                                                                                                                                                                                                        
|7.2 | Accounting statements prepared under paragraph 4 and, where relevant, the description of transactions prepared under paragraph 6 shall;                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|    | (1)                                                                                                                                                                                                                                                                                                                                                     | describe the basis of any apportionment or allocation of revenues, costs, assets and liabilities between the Appointed Business and any other business or activity of the Appointee or
between the Appointee and any Associated Company;
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|    | (2)                                                                                                                                                                                                                                                                                                                                                     | specify the nature of the revenues, costs, assets or liabilities which have been so apportioned or allocated; and                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|    | (3)                                                                                                                                                                                                                                                                                                                                                     | specify between which business, activity or Associated Company the revenues, costs, assets or liabilities have been so apportioned or allocated.                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                     
|7.3 | The Director may, after consulting such bodies as are reasonably representative of undertakers holding appointments made under Chapter I of Part II of the Act, or if none, the Appointee, from
time to time by reasonable notice to the Appointee issue such guidelines as are reasonable and appropriate for the purpose set out in sub             



|    | paragraph l(5) as to the bases of allocations and apportionments to be adopted in preparing the analyses required under subparagraphs 5.1(1) and 5.1(3) and 5.2 and in making the
allocations and apportionments referred to in subparagraph 7.2(1)and thereafter the Appointee shall prepare the analyses and make the allocations and apportionments in accordance with such guidelines as may apply from time to time.                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|8.  | Current Cost Accounting Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|8.1 | In addition to preparing accounting statements under paragraph 4, the Appointee shall prepare accounting statements, on the current cost basis in respect of the same period in accordance
with such guidelines as are reasonable and appropriate for the purposes of this Condition as the Director may from time to time, after consulting with such bodies as are reasonably representative of undertakers holding appointments made under Chapter I of
Part II of the Act, or if none, the Appointee, notify to the Appointee for the purposes of this paragraph.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|8.2 | Guidelines notified by the Director to the Appointee under subparagraph 8.1 may:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|9.  | Audit and publication of Accounting Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|9.1 | The Appointee shall procure the following reports by the Auditors addressed to the Director:                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



|     | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | in respect of each set of accounting statements prepared under paragraph 4, a report stating whether in their opinion that set of accounting statements represents a true and fair view of
the revenues, costs, assets and liabilities of, or reasonably attributable to, the business and activities mentioned in paragraph 4; and
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                    
|     | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | in respect of each set of accounting statements prepared under paragraph 8, a statement of opinion as to such other matters as may be specified in the guidelines applying to those
accounting statements.                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                    
|9.2  | The Appointee shall enter into a contract of appointment with the Auditors which shall include a term that the Auditors will provide such further explanation or clarification of
their reports, and such further Information in respect of the matters which are the subject of their reports, as the Director may reasonably require.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                    
|9.3  | The Appointee shall deliver to the Director a copy of each set of accounting statements prepared under this Condition and of each report referred to in subparagraph 9.1 as soon
as reasonably practicable and in any event not later than 15th
July(effective from 8th
May 1997)following the end of the financial year to which they relate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                    
|9.4  | Accounting statements prepared under this Condition (excluding the information required to be disclosed under subparagraphs 5.1(4) and 5.2, paragraph 6 and sub
paragraphs 7.1 and 7.2 and any information exempted from this subparagraph from time to time by the Director by notice to the Appointee), together with the Auditors reports delivered to the Director under subparagraph 9.3 in respect of
those accounting statements (but excluding any part of any such report to the extent that it relates specifically to any information excluded or exempted from this subparagraph as aforesaid), shall be published with the annual accounts of the
Appointee prepared under the 1985 Act or, at the Appointees option, with the annual accounts of its holding company prepared under the 1985 Act and copies thereof made available upon request to customers.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                    
|10.  | Guidelines and references to the Monopolies Commission                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                    
|10.1 | The Appointee may, by notice given to the Director within 1 month of the date of any such notice or notification as is referred to in paragraphs 5, 6, 7 and 8, require the
Director to refer to the Monopolies Commission for determination by it the question whether the guidelines the subject relevant notice or notification are appropriate and reasonable for the purposes specified in the relevant paragraph.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                    
|10.2 | Where the Appointee requires the Director to make a reference to the Monopolies Commission under subparagraph 10.1 any guidelines issued by the Director which are the
subject of that reference shall not apply unless and until the Monopolies Commission determines that they shall apply.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|APPENDIX
|--------
|        
|COLUMN 1
|        
|1.      
|        
|(a)     
|        
|(b)     
|        
|1A      
|        
|2.      
|        
|3.      
|        
|(a)     
|        
|(b)     
|        
|4.      
|        
|5.      
|        
|6.      
|        
|COLUMN 2
|        
|1.      
|        
|1A      
|        
|2.      
|        
|3.      
|        
|4.      
|        
|5.      
|        
|6.      
|        
|        
|*       







|Condition G: Code of Practice for Customers and relations with the Customer Service Committee
|---------------------------------------------------------------------------------------------
|                                                                                             
|1.                                                                                           
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|2.                                                                                           
|                                                                                             
|3.                                                                                           
|                                                                                             
|4.                                                                                           
|                                                                                             
|5.                                                                                           



|    | paragraph 4 as a condition of approving the Code under paragraph 1 or, as the case may be, approving any revision of the Code under paragraph 4, being such modifications as in the
Directors opinion are necessary to ensure that the Code complies with the requirements specified in paragraph 1. The Directors approval shall be deemed to have been given if, within the said period of two months, he shall not have specified
any such modifications to the Code or, as the case may be, the relevant revision.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|6.  | The Appointee shall:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|7.  | The Appointee shall establish within two months after the transfer date a procedure for handling complaints from customers about the manner in which the Appointee carries out the Appointed
Business, which shall include particulars of the training to be given to staff in the handling of complaints.                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|8.  | The Appointee shall provide special means of identifying officers authorised by the Appointee when they visit customers premises.                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|9.  | Subject to paragraph 10, the Appointee shall at the request of the Customer Service Committee meet the Customer Service Committee not less frequently than once in each Charging Year and on
such other occasions as the Customer Service Committee may reasonably request.                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10. | The Appointee shall not be required to meet the Customer Service Committee under this Condition before the expiry of three months after the transfer date.                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|11. | At not less than one meeting in each Charging Year held pursuant to paragraph 9 the Appointee shall be represented by at least one Director of the Appointee.                                                                                                                                                                                                                                                                                                                                                           

Condition H : Code of Practice and Procedure on Disconnection

|1. | The Appointee shall within two months after the transfer date prepare and submit to the Director for his approval a Code of Practice which shall:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                  
|   | (1)                                                                                                                                              
|   |                                                                                                                                                  
|   | (2)                                                                                                                                              
|   |                                                                                                                                                  

|   | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | contain such other information as the Appointee considers appropriate.                                                                                                       
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                              
|2. | The Appointee shall, not less frequently than once every three years and if and whenever requested to do so by the Director but not more frequently than once a year, review the Code and the
manner in which it has been operated, with a view to determining whether any modification should be made to it or to the manner of its operation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                              
|3. | In carrying out any review of, or making any substantive revision of, the Code or its operation (whether under paragraph 2 or otherwise) the Appointee shall consult the Customer Service
Committee and shall consider any representations made by it about the Code or the manner in which it is likely to be or, as the case may be, has been operated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                              
|4. | The Appointee shall submit to the Director for his approval any revision of the Code which, after consulting the Customer Service Committee if so required under paragraph 3, it wishes to
make.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                              
|5. | The Appointee shall make such modifications to the Code and any revision of the Code as the Director, after prior consultation with the Appointee, may specify within two months after the
date on which the Code or, as the case may be, the relevant revision is submitted to him under paragraph 1 or, as the case may be, paragraph 4 as a condition of approving the Code under paragraph 1 or, as the case may be, approving any revision of the
Code under paragraph 4, being such modifications as in the Directors opinion are necessary to ensure that the Code complies with the requirements specified in subparagraph l(1) and l(2). The Directors approval shall be deemed to have
been given if, within the said period of two months, he shall not have specified any such modifications to the Code or, as the case may be, the relevant revision.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                              
|6. | The Appointee shall:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                              
|   | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | send a copy of the Code and each revision of it (in each case, in the form approved, or deemed approved, by the Director) to the Customer Service Committee;                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                              
|   | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | with every demand for payment of charges, draw the attention of domestic customers to the existence of the Code in its latest form and how they may inspect or obtain a copy;
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                              
|   | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | make a copy of the Code in its latest form available for inspection at each Relevant Premises; and                                                                           



|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                     | send a copy of the Code in its latest form free of charge to any person requesting it.                                                                                                                                                                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|7.1 | The Appointee shall adopt a procedure in relation to disconnections of water supply to domestic premises for nonpayment of charges due to the Appointee or, as the case may be, the Water
Authority in respect of the supply of water to those premises ("Relevant Charges") which shall be consistent with the provisions of section 49 (section 6063 of the
1991 Act) and with the principles set out in subparagraphs 7.2 to 7.5.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|7.2 | A supply of water to domestic premises should not be disconnected if the occupier of those premises has been served with notice requiring him to pay Relevant Charges and within seven days
beginning with the day after which the notice was served serves a notice on the Appointee stating that he disputes his liability to pay those Relevant Charges except where:                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                     | the Appointee or, as the case may be, the Water Authority, has obtained an enforceable judgment against him for the payment of those Relevant Charges but they remain unpaid for any reason
(other than by virtue of compliance with the terms of the judgment); or         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                     | he is in breach of a payment agreement for the payment of those Relevant Charges entered into with the Appointee since the service of his notice                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|    | and in either of the cases mentioned in (1) and (2) except at a time when the person liable to pay those Relevant Charges is the occupier of the premises.                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|7.3 | A supply of water to domestic premises should not be disconnected:                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                     | if the person liable to pay Relevant Charges informs the Appointee that he is applying for help to the Social Security Office or local Social Services Department, for so long as that Office
or Department asks the Appointee to delay disconnection; or                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                     | for so long as the person liable to pay those Relevant Charges complies with an agreement entered into with the Appointee or, as the case may be, the Water Authority, for the payment of
those Relevant Charges.                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|7.4 | Where neither subparagraph 7.2 nor subparagraph 7.3 applies a supply of water to domestic premises should not be disconnected:                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                     | except at a time when the person liable to pay Relevant Charges is the occupier of those premises; and                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                     | except where the Appointee or, as the case may be, the Water Authority, has obtained an enforceable judgment against him for the payment of those Relevant Charges but they remain unpaid for
any reason (other than by virtue of compliance with the terms of the judgment)
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                             
|    | but so that if prior to the date of the bill in respect of the Relevant Charges an order for payment of charges due in respect of a supply of water has been made by a court of competent
jurisdiction against the occupier of those premises in proceedings                                                                                                                                                                           



|    | brought against that person by any water undertaker but the charges remain unpaid for any reason (other than by virtue of compliance with the terms of that order) subparagraph (2)
shall not apply and the supply of water to those premises may be disconnected without court proceedings being taken.                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|7.5 | Before a supply of water to domestic premises is disconnected in accordance with the procedure adopted by the Appointee under this paragraph the Appointee should make reasonable attempts to
contact the occupier with a view to agreeing a payment arrangement, failing which arrangement the Appointee should give notice of disconnection.                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|7.6 | In this paragraph references to a supply of water being disconnected include references to the disconnection of service pipe which for the purposes of providing a supply of water to the
premises in question is connected with any water main of the Appointee and to a supply of water to those premises being otherwise cut off.                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|7.7 | For the purposes of this paragraph "notice" means a notice served in accordance with section 187 (section 216 of the 1991 Act).                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|8.  | The Appointee shall inform the Customer Service Committee of the number of domestic premises in respect of which the supply of water has been disconnected for nonpayment
of charges during each consecutive period of six months, commencing with the period of six months starting on the transfer date. Such information shall be provided within one month of the expiry of the period to which it relates and shall show separately
the number of such premises in each part of the Area which is administered by the Appointee as an operating division, or equivalent, of the Appointed Business.



|Condition I:  Code of Practice and Procedure on Leakage
|-------------------------------------------------------
|                                                       
|1.                                                     
|                                                       
|2.                                                     
|                                                       
|3.                                                     
|                                                       
|4.                                                     
|                                                       
|5.                                                     
|                                                       
|6.                                                     
|                                                       
|7.                                                     
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       



|    | (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | send a copy of the Code in its latest form free of charge to any person requesting it.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                       
|8.1 | The Appointee shall follow the procedures described in this paragraph.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|8.2 | At the time when a meter is installed, the Appointee shall check the supply pipe between the meter and the customers tap to establish if there are significant leaks in that pipe.
Where as a result of that check a leak is detected in the supply pipe which can be repaired without additional excavation at the time the meter is installed the Appointee shall repair the leak at the Appointees expense. Where as a result of that
check a leak is detected which cannot be repaired without additional excavation, the Appointee shall notify the customer of the leak and ask the customer to repair it at the customers expense. If the customer then fails to repair the leak, the
Appointee shall be entitled to treat any subsequent loss of water as consumption by the customer and to charge the customer accordingly.                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|8.3 | Subject to subparagraph 8.2, where, after a meter
has been installed, a subsequent meter reading indicates that a customer has an abnormally high consumption which could be due to an undetected leak in the supply pipe, then if a leak is subsequently discovered the Appointee shall make an adjustment to
the customers measured charges provided that the customer (or the owner responsible for the supply pipe) carries out the necessary remedial work at the customers, or as the case may be, the owners direction and expense within a
reasonable period of time specified by the Appointee. The Appointee shall not be required to make such an adjustment in the event of a subsequent leak or where a leak has been caused through the negligence of the customer (or the owner responsible for the
supply pipe) or their respective agents or where the customer knew or ought to have known that there was a leak and failed to repair it.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|8.4 | Where the Appointee is required to make an adjustment to the customers measured charges under subparagraph 8.3, the adjustment shall be based upon the customers past
normal consumption. Where there is no record of past consumption, the adjustment shall be based upon typical usage for property of a similar type and the customers measured charges shall be further adjusted if the customers subsequent actual
usage is significantly different.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|8.5 | Where the Appointee is required to make an adjustment to a customers measured charges for water supply under this paragraph it shall make a similar adjustment to the customers
measured charges for sewerage services, provided that where sewerage services are provided in relation to the same premises by a different undertaker then the Appointee shall inform that undertaker as soon as reasonably practicable that the Appointee is
required to make such an adjustment to the customers measured charges for water supply and of the basis on which the adjustment has been, or will be, made.                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|8.6 | Where the Appointee is informed by any water undertaker that it is required to make an adjustment to a customers measured charges for a supply of water to any premises in relation
to which the Appointee provides sewerage services the Appointee shall make an adjustment to the customers measured charges for sewerage services on a basis similar to that made by that water undertaker                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                







|Condition J:     Levels of Service Information and Service Targets
|------------------------------------------------------------------
|                                                                  
|Part I.                                                           
|                                                                  
|1.                                                                
|                                                                  
|1.1                                                               
|                                                                  
|1.2                                                               
|                                                                  
|1.3                                                               
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|1.4                                                               
|                                                                  
|2.                                                                
|                                                                  
|                                                                  







|         | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | a report, signed by or on behalf of the Appointee, containing such information as the Director may reasonably specify as to the methods used, and the steps taken, by the Appointee for the
purpose of monitoring, assessing and reporting on the matters in respect of which Levels of Service Information has been furnished; and                                                                                                                                                                                                                             
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | a statement, signed by or on behalf of the Appointee, of the reasons why, and the extent to which, (if such be the case) the quality of any Services shall have been such that any standard
by reference to which Levels of Service Information has been furnished shall not have been met. The statement shall include, without limitation, information as to the categories of persons to whom those Services have been so provided or who have been
affected by the carrying on of the Appointed Business in that manner and their geographical distribution.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Part II. | Service Targets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.       | Setting of Service Targets by the Appointee                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.1      | The Appointee shall once in each Charging Year, starting with the Charging Year commencing on 1st
April 1990, notify the Director of its intentions as to the quality of such Services as are specified in Appendix B to the Levels of Service Letter in respect of each Charging Year falling within the period beginning at the start of the Charging Year in
which the notification falls to be given and ending on the expiry of such number of Charging Years as is specified in that Appendix and otherwise in accordance with the procedures specified in that Appendix.                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.2      | Where the Director considers it requisite or expedient for the purpose of enabling him properly to keep the quality of Services under review the Director may require the Appointee to
notify him of its intentions as to the quality of such other Services in accordance with such requirements as the Director may reasonably specify.                                                                                                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.3      | The Appointees intentions shall be expressed in any notification under subparagraph 3.1 or 3.2 as a target (a "Service Target") for achievement by such date or over such
period or at such times during such period as may be specified in Appendix B to the Levels of Service Letter or, as the case may be, as the Director may have specified when he requires the Appointee to notify him of its intentions under subparagraph 3.2 and in respect of the whole or such part of the Area as may be specified in the said Appendix B or, as the
case may be, as the Director may have so specified and so as to be capable of verification in accordance with this Condition.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.       | Monitoring of Service Targets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         | The Appointee shall keep under review during each Charging Year the quality of Services as compared with any relevant Service Target notified by it to the Director under paragraph 3 as a
target for achievement during that Charging Year or by a date or at a time during that Charging Year or over a period including that Charging Year. For this purpose the Appointee shall take such steps to monitor and assess the quality of Services as may
be necessary to enable such comparison to be made and to enable the Appointee to make the report referred to in paragraph 5.                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|5.       | Reporting on Service Targets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       







|5.1 | The Appointee shall furnish to the Director a written report (a"Service Target Report") as to the quality of Services as compared with any relevant Service Target.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|5.2 | A Service Target Report shall include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|5.3 | Without prejudice to the generality of subparagraph 5.2, a Service Target Report may include a statement of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|5.4 | The Appointee may also specify in a Service Target Report any revision of any Service Target which the Appointee has determined to make having regard to any matters included in that
Service Target Report, including, without limitation, such matters as are referred to in subparagraph 5.3. Such revision may be, without limitation, as to the date by, or the period over, or the times at, which
during any period the relevant Service Target was intended to be achieved, or the part of the Area in respect of which the relevant Service Target was intended to be achieved. Any such revised Service Target is hereinafter referred to as a"Revised Service Target". Paragraphs 4, 5 (including this subparagraph) and 6 to 13 inclusive shall apply mutatis mutandis to any Revised Service
Target.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|5.5 | The Appointee shall once in each Charging Year furnish a Service Target Report to the Director in respect of that Charging Year, provided that, if the Director considers it requisite or
expedient for the purpose of deciding whether to make an application to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  





|          | the Secretary of State under section 38 (section 38 & 39 of the 1991 Act) or 68 (section 95 & 96 of the 1991 Act) (and, if
so, what provisions should be set out in the application) the Appointee shall furnish a Service Target Report more frequently (but not more frequently than is reasonable).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|6.        | Measures to achieve Service Targets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|          | Where, following receipt by the Director of any Service Target Report, he considers it requisite or expedient for the purpose of deciding whether to make an application to the Secretary
of State under section 38 (section 38 & 39 of the 1991 Act) or 68 (section 95 & 96 of the 1991 Act) (and, if so, what provisions should be set out in the application), the Appointee shall furnish to the Director in writing within such reasonable
period as the Director may specify such further Information as the Director may reasonably require, including, but not limited to, Information as to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|          | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|          | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Part III. | Certification and Verification of Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|7.        | Levels of Service Information and Service Target Reports required to be furnished once in each Charging Year shall be accompanied by a certificate, signed by the Auditors (or by such
other person as the Director may approve, such approval not to be unreasonably withheld) stating whether, in their opinion, the relevant Levels of Service Information and Information contained in the relevant Service Target Report has been ascertained by
the use of the methods and the taking of the steps which the Appointee has informed the Director it has used and taken and whether, in their opinion, the methods used and the steps taken are adequate for the purpose of ascertaining that Levels of Service
Information and the Information contained in that Service Target Report. To the extent that Levels of Service Information and a Service Target Report contain the same Information and are furnished at the same time only one certificate need be provided
under this paragraph. Levels of Service Information and Service Target Reports furnished in accordance with any requirement of the Director under subparagraph 1.3 or subparagraph 5.5 shall also be accompanied by a like certificate if the
Director so requires.
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|8.        | The Appointee shall cooperate fully with the Director in any investigation of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|          | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|          | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|          | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   





|         | which the Director may carry out for the purpose of deciding whether to make an application to the Secretary of State under section 38 (section 38 & 39 of the 1991 Act) or 68 (section
95 & 96 of the 1991 Act).                                                                                                          
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                            
|9.       | Such cooperation shall include, without limitation:                                                                                                                                                                                                                                                                       
|         |                                                                                                                                                                                                                                                                                                                            
|         | (1)                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                            
|         | (2)                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                            
|10.      | Nothing in paragraphs 8 and 9 shall require the Appointee:                                                                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                            
|         | (1)                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                            
|         | (2)                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                            
|11.      | The Appointee shall not be liable to the Director for any loss or damage to persons or property which arises out of the Director having such access or doing any such thing as is mentioned
in paragraphs 8 and 9 except to the extent that such loss or damage is caused by the Appointees negligence or willful default.
|         |                                                                                                                                                                                                                                                                                                                            
|12.      | In paragraphs 9, 10 and 11:                                                                                                                                                                                                                                                                                                
|         |                                                                                                                                                                                                                                                                                                                            
|         | (1)                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                            
|         | (2)                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                            
|Part IV. | Publication of Information                                                                                                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                            
|13.      | Unless the Director otherwise consents in writing (such consent not to be unreasonably withheld) pursuant to an application to him in that behalf by the Appointee when the relevant
Information and Reports are furnished to the Director under this Condition the Appointee shall:                                       



|(1) | draw the attention of customers to the existence of Levels of Service Information (excluding any report or statement furnished under paragraph 2) and Service Target Reports furnished to
the Director under this Condition in respect of a Charging Year;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                           
|(2) | make a copy of the most recent Levels of Service Information (excluding any report or statement furnished under paragraph 2) and Service Target Report available for inspection at each
Relevant Premises; and                                            
|    |                                                                                                                                                                                                                                                           
|(3) | send a copy of the most recent Levels of Service Information (excluding any report or statement furnished under paragraph 2) and Service Target Report to any person requesting it.                                                                       
|    |                                                                                                                                                                                                                                                           





|Condition K: "Ring Fencing", and Disposals of Land
|--------------------------------------------------
|                                                  
|1.                                                
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|2.                                                
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|2.1                                               
|                                                  
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|                                                  
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|                                                  
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|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  





|    | "Short term Disposal"means a disposal which consists of the creation of any interest or right in or over protected land which the Appointee has an unconditional right to
terminate without penalty at any time and from time to time by not more than thirty monthsnotice or which expires or otherwise ceases in accordance with its terms within thirty months of the date of its creation without any other interest or right
arising on such expiry or cessation;                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | "the Transfer Threshold"for the purpose of any disposal of land to an Associated Company is                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | "value"includes value of any kind including, without limitation, cash, the value of real or personal property or anyinterest in such
property and the value of any right or benefit, actual or prospective, and the value of any release, inwhole or in part, of any obligation or claim.                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2.2 | For the purpose of calculating "best price":                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.  | "Ring Fencing"                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.1 | The Appointee shall at all times ensure, so far is reasonably practicable, that if a special administration order were made in respect of the Appointee the Appointee would have available to it sufficient rights
and assets (other than financial resources) to enable the special administrator so to manage the affairs, business and property of the Appointee that the purposes of such order could be achieved, provided that this paragraph shall not require the
Appointee to seek to renegotiate the terms of any contract or obligation which, in accordance with a scheme under Schedule 2, is transferred to the Appointee.





|3.2 | The Appointee shall publish with its audited accounts for each financial year a statement as to whether the Appointee was in compliance with subparagraph 3.1 as at the end of that financial year.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







|3.3 | Where any such rights and assets as are mentioned in subparagraph 3.1 are provided or made available by any Group Company, the Appointees obligations under sub
paragraph 3.1 in respect of such rights and assets shall be such as they would be if the words "so far as reasonably practicable" and the proviso were omitted from that subparagraph.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|3.4 | The state, condition and capacity of assets used by the Appointee in the Appointed business are the subject of Conditions J and L and accordingly subparagraph 3.1 shall
not apply thereto.                                                                                                                                                              
|
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|4.0 | Disposals of protected land other than disposals by auction or formal tender or to Associated Companies                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|4.1 | Subject to subparagraph 4.2, the Appointee shall not make any disposal of any protected land, unless the Appointee shall have complied with the provision of sub
paragraph 4.3.                                                                                                                                                                         
|   
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|4.2 | Subparagraph 4.1 shall not apply:                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|    | (1)                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|    | (2)                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|    | (3)                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|    | (4)                                                                                                                                                                                                                                                                                                                                                       
|
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|    | (5)                                                                                                                                                                                                                                                                                                                                                       
|
|    |                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                           
|4.3 | Subject to subparagraph 4.6, the Appointee shall:                                                                                                                                                                                                                                                                                                        



| | (1) | not less than 10 working days prior to the Appointee entering into an obligation (whether unconditional orsubject to
conditions)which requires or might require it to make the proposed disposal, furnish to the Directora Disposal Certificate which:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
| |     |                                                                                                                                                                                                                                                       
| |     | (a)                                                                                                                                                                                                                                                   
|
| |     |                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                       
|
|
|
| |     |                                                                                                                                                                                                                                                       
| |     | (b)                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                       
| |     | (c)                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                       
| |     | (d)                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                       
|
| |     |                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                       
|
| |     |                                                                                                                                                                                                                                                       
| |     | (e)                                                                                                                                                                                                                                                   
|
|
|
| |     |                                                                                                                                                                                                                                                       
| |     | (f)                                                                                                                                                                                                                                                   
|
| |     |                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                       
| |     | (g)                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                       



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        | (ii)  | that the consideration and other value (if any) certified under (d) above to be received or derived, or expected to be received or derived, by the Appointee from or in
connection therewith is the total value to be received or derived, or expected to be received or derived, from the proposed disposal, whether by the Appointee or any other person;                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        | (iii) | except where a certificate is furnished under subparagraph 4.5, that in the honestly held and reasonable opinion of the Appointee, taking account of proper professional
advice obtained by the Appointee for that purpose, the consideration certified under (ii) is the best price that could reasonably be obtained for the protected land in question, having regard to all the circumstances at the time when the certificate is
given (including, but without limitation, any reasonable prospect of planning permissions being obtained); and                                                                                                            
|
|
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        | (iv)  | that neither the Appointee nor, to the best of the knowledge, information and belief of the Appointee, having made due and careful enquiry, any Associated Company or any
company or business in which the Appointee, or, to the best of the knowledge, information and belief of the Appointee, having made due and careful enquiry, any Associated Company, has a material direct or indirect interest, shall, following the proposed
disposal or any other transaction, a continuing interest whether direct or indirect in the protected land the subject of the proposed disposal or in any development involving or connected with that protected land; and
|
|
|
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | prior to entering into the relevant obligation, furnish to the Director in writing such further Information regarding the proposed disposal which the Director may reasonably
request.
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.4 | For the purpose of subparagraph 4.3(1)(g)(iv), "interest" includes an entitlement to a share of profits or participation in assets, rights or benefits but
excludes any interest which consists solely of an entitlement to receive installments of consideration which as to amount and timing are certain or variable only by reference to the grant of planning permissions.                                                                                                                                                                                                                                
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.5 | The Appointee may, instead of giving the confirmation required by subparagraph 4.3(1)(g)(iii), furnish to the Director a certificate by a valuer appointed by the Appointee
("the Valuer")addressed to the Director which states that in the opinion of the Valuer the consideration certified under subparagraph 4.3(1)(g)(iii) is the best price that could reasonably be obtained for the protected land in question,
having regard to all the circumstances at the time when the certificate is given (including, but without limitation, any reasonable prospect of planning permissions being obtained).
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|4.6 | Where theAppointee proposes to make any such disposal as is mentioned in subparagraph 4.1 and the terms orcircumstances of the
proposed disposal are such that a Disposal Certificate giving the full confirmation required by(f) or(g) ofsubparagraph 4.3(1) (including, where relevant, such a certificate as is referred to in subparagraph4.5) cannot properly be given, the Appointee shall not enter into any obligation (whether unconditional or subject toconditions) which requires or might require it to make that proposed disposal unless:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|5.  | Disposals of protected land by auction or formal tender                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



|5.1 | Where theAppointee proposes to dispose by auction or formal tender of any protected land, the value of which(when aggregated with the
value of any other such protected land as is described in subparagraphs 4.2(2) (a) and (b)),exceeds the Materiality Amount, it shall:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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|    |                                                                                                                                                                                                                                                                             
|    | (1)                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                             
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|    |                                                                                                                                                                                                                                                                             
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|    |                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                             
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|    |                                                                                                                                                                                                                                                                             
|    | (2)                                                                                                                                                                                                                                                                         
|

|    |                                                                                                                                                                                                                                |                                                                                
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------
|5.2 | In any case where the full confirmation required by subparagraph 5.1(1)(a)(i) or (iii) cannot properly be given, theAppointee shall not proceed with the proposed
disposal without the prior written consent of the Director.
|
|    |                                                                                                                                                                                                                                |                                                                                
|6.  | Disposals of Protected Land to Associated Companies                                                                                                                                                                           
|    |                                                                                                                                                                                                                                |                                                                                
|6.1 | Subject to subparagraph 6.2, the Appointee shall not make any disposal, other than a Short Term Disposal, of anyprotected land to any Associated Company, unless
it has complied with the provisions of subparagraph 6.3.   
|
|    |                                                                                                                                                                                                                                |                                                                                
|6.2 | Subparagraph 6.1 shall not apply:                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                |                                                                                
|    |                                                                                                                                                                                                                                | to any disposal of any protected land the value of which, when aggregated with:



|    |                                                    | (a)                                                                                                                                                                                                                                                                                                                                    | the value of any other protected land which affects or might affect the value of such protected land or the value of which is or
might be affected by such protected land; and                                                                                                                                                                
|--- | -------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    | (b)                                                                                                                                                                                                                                                                                                                                    | to the extent not taken into account under (a), the value of any other protected land the subject of any other disposal which has taken
place, is proposed or contemplated and which in the honestly held and reasonable opinion of the Appointee is or might be related to, or connected or interdependent with, the first mentioned disposal
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|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    | does not exceed the Transfer Threshold.                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|6.3 | Subject to subparagraph 6.4, the Appointee shall:
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    | (1)                                                | not later than 10 working days (or such other period to be agreed in advance between the Appointee and the Director) prior to the Appointee entering into any obligation (whether
unconditional or subject to conditions) which requires or might require it to make that disposal (a "relevant obligation"), furnish to the Director:
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|
|
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    | (i)                                                                                                                                                                                                                                                                                                                                    | a Disposal Certificate, which contains the information and confirmations required to be contained in a Disposal
Certificate furnished under subparagraph 4.3(1), including such of the matters specified in (g) as can properly be certified; and                                                                                            
|
|
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    | (ii)                                                                                                                                                                                                                                                                                                                                   | a certificate by a Valuer appointed by the Appointee and approved by the Director for the purpose of this sub
paragraph ("the Valour") addressed to the Director which states:                                                                                                                                                               
|
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        | (A)                                                                                                                                                                                                                                                                                                                                           
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|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        | (B)                                                                                                                                                                                                                                                                                                                                           
|
|
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    |                                                    |                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                               
|    | (2)                                                | shall furnish to the Director in writing such further information regarding the proposed disposal which the Director may reasonably request; and                                                                                                                                                                                      
|



|    | (3)                                                                                                                                                                                                                                                                                                                                                                                        | ensure that the terms on which the proposed disposal is made are in accordance with any terms which may have been specified by the Director, either in relation to disposals
of protected land to Associated Companies generally or in relation to the particular proposed disposal, being such terms as the Director considers appropriate to secure that the Appointee receives such share of any value to be derived or expected to be
derived by the Associated Company from the land in question as the Director considers appropriate, having regard to the duty imposed on the Director under section 7(3) (section 2 of the 1991 Act).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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|    |                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6.4 | In any case where the full confirmation required by (f) of subparagraph 4.3(1) cannot properly be given, the Appointee shall not enter into a relevant
obligation unless the prior written consent of the Director to the proposed disposal has been obtained, such consent not to be unreasonably withheld or delayed.                                                                  
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|    |                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|7   | Disclosure of Information to Valuers                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Appointee shall disclose to the Valour appointed for the purpose of any provision of this Condition all Information which, in the reasonable opinion of the
Appointee, has or is likely to have a material bearing on the Valours certificate to be given under that provision and such other Information as the Valour may reasonably require to enable him to give his certificate.
|
|
|



|Condition L :  Underground Asset Management Plans
|-------------------------------------------------
|                                                 
|                                                 
|1.                                               
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|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           | revised Underground Asset Management Plan or, in the case of a revised Underground Asset ManagementPlan prepared for
the purposes of a Periodic Review, the start of the relevant Review Charging Year;                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | a "Review Date" means the first date specified in the relevant paragraphs of Condition B by which the
Appointee isrequired to furnish Information to the Director for the purpose of any Periodic Review.
|
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                          
|2.  | Duty to furnish Information                                                                                                                                                                              
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                          
|2.1 | The Appointee shall prepare and furnish to the Director an underground asset management plan (an "UndergroundAsset Management Plan") showing separately:                                                 
|
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                          
|    | (1)                                                                                                                                                                                                       | an estimate and other Information in respect of Network Expenditure required to be made or incurred by the
Appointee in each year during the Plan Period for the purposes of ensuring:                                                                                                                   
|
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           | (a)                                                                                                                                                                                                                                                                                                       | that Network Assets used by the Appointee as at the transfer date (or, in the case of a revisedUnderground Asset Management Plan, as at the date of that revised Underground Asset ManagementPlan) are, and will throughout the Plan Period be, maintained in such a state or condition as is
necessaryfor the purposes described in subparagraph 2.2 ("the Relevant Purposes"), insofar as Network Assetsare necessary
for, or relevant to, the Relevant Purposes; and
|
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|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           | (b)                                                                                                                                                                                                                                                                                                       | that the capacity of the system of water supply or, as the case may be, of public sewers comprisingsolely those Network Assets (but not including any other part of the Appointees system of watersupply or, as the case may be, of public sewers) is maintained                                                                                                                                                                                                       
|
|
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                           | and the estimate and other Information shall show expenditure to be capitalised and,
separately, expenditure tobe expensed; and                                                                                                                                                                          
|
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                          
|    | (2)                                                                                                                                                                                                       | an estimate and other Information in respect of Network Expenditure required to be made or incurred by theAppointee in each year during the Plan Period for the purpose of ensuring that, taking into account theexpenditure to be made or incurred for the purposes referred to in subparagraph 2.1(1):
|
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|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           | (a)                                                                                                                                                                                                                                                                                                       | the Appointee will at all times and from time to time have available to it for use all Network Assets (and insuch a state or condition) as are necessary for the Relevant Purposes, insofar as Network Assets arenecessary for, or relevant to, the Relevant Purposes; and                                                                                                                                                                                              
|
|
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                           | (b)                                                                                                                                                                                                                                                                                                       | the capacity of the system of water supply or, as the case may be, of public sewers comprising solelythose Network Assets (but not including any other part of the Appointees system of water supply or,as the case may be, of public sewers) is and will be such as is necessary for the
Relevant Purposes.                                                                                                                                                           
|
|



|2.2 | The Relevant Purposes referred to in subparagraph 2.1 are:
|--- | -----------------------------------------------------------
|    |                                                            
|    | (1)                                                        
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|    |                                                            
|    | (2)                                                        
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|

|    | but so that, unless the context otherwise requires, references in this Condition to the Relevant Purposes shall be read and construed subject to any
assumptions as may be specified by the Appointee in the Underground Asset Management Plan as to the nature and scope of the Regulated Activities or, as the case may be, the Appointment Obligations and as to the effect of any provision of the Act or any
other enactment or subordinate legislation relating to the Regulated Activities.                                                                                                                                                                                                                                                                                                                                      
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|2.3 | Where the Appointee has specified any such assumptions as are referred to in subparagraph 2.2, the Appointee shallalso furnish an estimate and other Information as described in subparagraphs 2.1(1) and (2) on the basis of such otherassumptions as to the matters referred to in subparagraph 2.2 as
may be specified by the Director.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|2.4 | The Appointee shall keep the Underground Asset Management Plan prepared under subparagraph 2.1 under reviewand shall prepare a revised Underground Asset Management Plan in respect of the Plan Period from time to time and inany event by each Review Date, to the extent that such revision is necessary
having regard to the Relevant Purposes,this Condition and Condition B and shall furnish to the Director any such revised Underground Asset ManagementPlan. Subparagraph 2.3
shall apply to any such revised Underground Asset Management Plan and references in thisCondition to a revised Underground Asset Management Plan shall include references to any estimate and otherInformation which the Appointee
is required to furnish under subparagraph 2.3 in respect of that revisedUnderground Asset Management Plan.
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|2.5 | For the purposes of subparagraphs 2.1 and 2.4:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | and other Information in respect of any expenditure required to be made or incurred by the Appointee duringthe Plan Period in respect of such Network Assets for the Relevant Purposes; and                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | there shall be taken into account any changes in the nature of the Regulated Activities and the AppointmentObligations which the Appointee knows have occurred or will occur or which the Appointee reasonablybelieves will, or are likely to, occur (including, without limitation, any change in demand for the provision bythe Appointee of any
services provided by it in the course of carrying out the Regulated Activities).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.  | Information Systems                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.1 | The Appointee shall establish and maintain methods and procedures for the purposes of:                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | keeping under review, collecting Information in respect of, and carrying out surveys of, the state, condition,capacity
and performance of Network Assets; and                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | preparing, keeping under review and revising from time to time the Underground Asset Management Plan forthe purposes of:                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.2 | The Appointee shall furnish to the Director a written description of such methods and procedures. The Appointeeshall keep under
review and shall revise such methods and procedures from time to time to the extent necessaryhaving regard to the purposes for which such systems and procedures are intended to be used, this Condition andCondition B and shall furnish
to the Director a written description of any revision of such methods and procedures.                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.  | Reports                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.1 | Any revised Underground Asset Management Plan and any revision of the methods and procedures referred to in paragraph 3 (which in the reasonable opinion of the Director is material having
regard to the purposes for which the Underground Asset Management Plan and such methods and procedures are intended, to this Condition and to Condition B) shall, if so required by the Director, be reported on by a person appointed by the Appointee and
approved by the Director (such approval not to be unreasonably withheld) ("the Assessor").
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.2 | The Appointee shall enter into a written contract of engagement with the Assessor which shall:                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | where such a report is required by the Director under subparagraph 4.1, require the Assessor to prepare andfurnish to the Director, and separately to                                                                                                                                                                                                                                                                             



|                                                                                                                                                                                                                                                                                  | the Appointee, a written report addressed jointly to the Director and the Appointee:                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                  | (a)                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                  | (b)                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                       
|(2)                                                                                                                                                                                                                                                                               | include a term that the Assessor will provide such further explanation or clarification of his report as theDirector
may reasonably require and that where, by reason of anything in the Assessors report, itappears to the Director:
|                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                  | (a)                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                  | (b)                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                  | the Assessor will provide such further Information in respect of, or verification of, the matters which are the subject of his report as the Director may reasonably require.                                                         
|                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                       
|The contract of engagement may also include provisions requiring the Assessor, his employees and agents to keep confidential and not to disclose, except to the Director or as
required by law, any Information which the Assessor obtains in the course of preparing his report.



|4.3 | The Appointee shall cooperate fully with the Assessor to enable him to prepare his report, including withoutlimitation, so
far as is necessary for that purpose:                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4.4 | Nothing in subparagraph 4.3 shall require the Appointee:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4.5 | In subparagraphs 4.3 and 4.4 references to the Assessor include references to his employees and agents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|5.  | General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|5.1 | The provision by the Water Authority to the Secretary of State of the estimate and other information enclosed withthe letter
entitled "Underground Asset Management Plan" dated 17th
August 1989 and the description in theUnderground Asset Management Plan of the Appointee's relevant methods and procedures shall be deemed to havebeen furnished to the Director by the Appointee under subparagraphs 2.1 and 3.2 and to satisfy the obligations of theAppointee under those subparagraphs (insofar as subparagraph
3.2 requires the Appointee to furnish a writtendescription of the methods and procedures established by it).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|5.2 | Any other Information required to be furnished by the Appointee to the Director under this Condition shall befurnished within three
months of the revision which gives rise to the requirement to furnish Information.                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|5.3 | The Appointee shall deliver to the Director, at the same time as it delivers to him accounting statements in respect of afinancial
year prepared under paragraph 4 of Condition F, a statement of the expenditure made or incurred in relation toNetwork                                                                                                                                                                                                                                                                                                                                                                                



| | Assets during that financial year, distinguishing between amounts which have been expended and amounts which have been capitalised, together with the details necessary to explain any
difference between that expenditure and the expenditure which the Appointee had informed the Secretary of State or, as the case may be, the Director under this Condition it intended to make or incur in relation to Network Assets during that financial year.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Condition M: Provision of Information to the Director
|-----------------------------------------------------
|                                                     
|1.                                                   
|
|                                                     
|2.                                                   
|
|                                                     
|3.                                                   
|
|
|
|
|
|
|
|
|                                                     
|4.                                                   
|
|
|                                                     
|5.                                                   
|
|
|                                                     
|6.                                                   
|
|
|
|



|Condition N: Fees (revised with effect from 1 April 1993 (as amended in respect of subparagraphs 3.1 and 3.2, (and protocol) inaccordance with the Secretary of States approval, dated
1999/2000
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                  
|1.                                                                                                                                                                                                
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|2.                                                                                                                                                                                                
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|(2)                                                                                                                                                                                               
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  
|                                                                                                                                                                                                  



|(6) | on 1st
April of the first Charging Year after the announcement by the Director of his intention to carry out aPeriodic Review, and at the start of each Charging Year up to but not including the
Periodic Review Year, an additional fee, which shall represent a fair proportion, to be determined each year by the Director according to a method which has been disclosed in writing to the Appointee, of additional costs estimated by the Director as being
likely to be incurred in that Charging Year by him in the preparation for or the carrying out of a Periodic Review, over and above the costs estimated by the Director as being likely to be incurred in that Charging Year under paragraph 2(5) above; and
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | (7)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(a) | all renewal and additional fees payable at the start of that Charging Year under the Appointments and all other appointments made under the said Chapter I; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3.  | Limits on renewal fee, special fee and additional fee                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3.1 | The aggregate of the renewal fee payable in respect of any Charging Year starting on or after 1st
April 1993 (other thana Periodic Review Year) and part of any special fee apportioned to the renewal fee payable in the same Charging Yearshall not exceed X, where X shall be calculated in any year by the equation:                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | where the figures in the equation are defined as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | "S" is equal to the figure of £11.9M increased by the percentage increase in the Retail Prices Index between thatpublished for the month of November 1998 and that published for the month of November immediately preceding thestart of the Charging Year in which that renewal fee and special fee are payable,                                                                                                                                                                                                                                                                                                                                                                                                            



|    | "t" is equal to the turnover of the Appointed Business as shown in the accounting statements prepared by theAppointee under Paragraph 4 of Condition F for the financial year ending twelve months before the start of theCharging Year in which that renewal fee and special fee are payable;                                                                                                                                                                                                                                                                                                                                      
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | "T" is equal to the aggregate of the turnover of the Appointed Business of all of the Appointees as shown in theiraccounting statements prepared under Paragraph 4 of Condition F for the financial year ending twelve months beforethe start of the Charging Year in which that renewal fee and special fee are
payable.                                                                                                                                                                                                                                                                                                           
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3.2 | The aggregate of the renewal fee and any special fee payable in any Periodic Review Year and of the additional feespayable under paragraph 2(6), in the years immediately preceding that Periodic Review Year, shall not exceed, Xderived from subparagraph 3.1 plus a figure of 0.1, calculated as the sum of the percentages which each such feerepresents of the
turnover of the Appointed Business, as shown in the Accounting Statements prepared by theAppointee under paragraph 4 of Condition F, as an average over the five years concluding with the previous PeriodicReview Year. (seeprotocol at end of this condition)
|
|
|
|
|

|    |       
|--- | ------
|3.3 | Where:
|    |       
|    | (1)   
|    |       
|    | (2)   
|    |       
|    | (3)   

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | the Director may, by notice to the Secretary of State, refer to the Secretary of State for determination by him not laterthan twelve months after the date which is the Review Notice Date for the purpose of the relevant Periodic Review, thequestion whether the limits on the fees specified in subparagraph 3.1 and 3.2 payable in respect of any Charging Yearstarting on or
after 1st
April 2000 should be changed (and if so what change should be made to that limit).
|
|
|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3.4 | This Condition shall be modified by the change or changes (if any) to the said limits necessary to give effect to anydetermination made by the Secretary of State following a reference under subparagraph 3.3.                                                                                                                                                                                                                                                                
|

|                                                                                                                                                                                                                                                                                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE:                                                                                                                                                                                                                                                                                         
|Wherever paragraph numbers are quoted in the alternative (e. g. 13/14) the lower number refers to that paragraph in Condition B ofthe appointment of each water only company and the higher number refers to the same paragraph in the joint appointment of eachwater and sewerage undertaker.



|PROTOCOL FOR THE APPLICATION OF LICENCE CONDITION N3.2:                                                             
|--------------------------------------------------------------------------------------------------------------------
|                                                                                                                    
|Condition N places limits on the fees which the Director General can levy to cover expenditure on a Periodic Review.

Condition B of the licence states that companies will have five yearly Periodic Reviews, this in turn means that Periodic Review work is likely to be spread over the five years leading up to the
Periodic Review year eg 1999-2000, 2004-05 etc. The ceiling on Condition N is governed by the following formula:

|AF+PRY | < | Y |                                                                                                                                
|------ | - | - | -------------------------------------------------------------------------------------------------------------------------------
|       |   |   |                                                                                                                                
|AF     | = |   | Total additional fees incurred before the Periodic Review Year;                                                                
|       |   |   |                                                                                                                                
|PRY    | = |   | The total renewal fee charged in the Periodic Review Year                                                                      
|       |   |   |                                                                                                                                
|Y      | = |   | X per paragraph 3.1 plus 0.1%of the average annual turnover of the five years concluding with the previousPeriodic
Review Year.
|       |   |  



|Illustrative Example -Revised Condition N |       |       |       |       |      
|----------------------------------------- | ----- | ----- | ----- | ----- | -----
|                                          |       |       |       |       |      
|Year                                      | 1     | 2     | 3     | 4     | 5    
|Renewal fee                               | 11.90 | 11.90 | 11.90 | 11.90 | 11.90
|(base) £m                                 |       |       |       |       |      
|RPI at 2.5% per                           | 0.29  | 0.60  | 0.91  | 1.23  | 1.56 
|annum £m                                  |       |       |       |       |      
|Total £m                                  | 12.19 | 12.50 | 12.81 | 13.13 | 13.46
|Additional fee *£m                        | 1.2   | 1.2   | 1.2   | 1.2   | 1.2  
|PR costs in                               |       |       |       |       | 1.2  
|Periodic Review year                      |       |       |       |       |      
|Total £m                                  | 13.39 | 13.70 | 14.01 | 14.33 | 14.66





|* | Assumes average turnover over the five years 199495 to 19992000                                                                                                                                                                              | = £6 billion     
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------
|  |                                                                                                                                                                                                                                                | 0.1%of £6 billion
|  |                                                                                                                                                                                                                                               
|  | Additional fee as per para 2(6) recovered over years 1 to 4. Periodic Review costs in year 5 recovered as part of the Renewal Fee. The total of Renewal Fee in year 5 and the additional fee
years 1 to 4 is constrained by the formula above.



In this example the additional fee is distributed evenly over the four years, however in reality, theamount of additional fees will be kept
lower, to only recover costs.















Condition O:     Circumstances in which a replacement appointment may be made

For the purposes of paragraph (c) of section 12(2), (section 7 & 9 of the 1991 Act) the only circumstances in which an appointment or variation to which section 12 (section 7 & 9 of the 1991
Act) applies may be made in relation to the area for which the Appointee holds the Appointment as water undertaker or, as the case may be, sewerage undertaker under this instrument are where the Secretary of State has given the Appointee at least 10 years
notice, expiring not earlier than 25 years after the transfer date, to terminate the relevant Appointment in relation to the whole of its area and the said period of notice has expired.



Condition P: The Role of Scottish Power Plc.

|l(1) | The Appointee shall, not later than 4 October 1996, procure from Scottish Power Plc a legally-enforceable undertakingin
favour of the Appointee in a form specified by the Director and expressed to remain in force for as long as theAppointee retains the Appointments and Scottish Power Plc remains the holding company of the Appointee.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|     |                                                                                                                                                                                                                                                                                                                                               
|l(2) | The undertaking referred to in (1) above shall provide that                                                                                                                                                                                                                                                                                  



| | (a) | Scottish Power Plc will, and will procure that each subsidiary of Scottish Power Plc (other than the Appointeeand its subsidiaries) will, give to the Appointee all such Information as may be necessary to enable theAppointee to comply with the requirements of the conditions of the Appointments;           
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
| |    
| | (b) | Scottish Power Plc will, and will procure that each subsidiary of Scottish Power Plc (other than the Appointeeand its subsidiaries) will, refrain from any action which would or may cause the Appointee to breach any of itsobligations under the Act or the conditions of these Appointments; and              
|
|
| |    
| | (c) | Scottish Power Plc will ensure that at all times the Board of the Appointee contains two nonexecutiveDirectors, who shall be persons of standing with relevant experience, including in particular an understanding of the interests of customers of the Appointee and how these can be respected and protected.
|

|  |                                                                                                                                                                                                                                                                                          
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2 | The Appointee shall, not later than 31 October 1997, produce to the Director the undertaking given to it underparagraph
1 of this condition, amended to reflect the requirements in paragraph 1(2)(c) above and provide to him suchcertified copies of the undertaking as he may require.
|
|
|  |                                                                                                                                                                                                                                                                                          
|3 | The Appointee shall immediately inform the Director in writing, if it becomes aware that the undertaking referred to inparagraph 1 of this condition has ceased to be legally-enforceable or that there has been any breach of its terms.                                                
|
|  |                                                                                                                                                                                                                                                                                          
|4 | The Appointee shall not, except with the written consent of the Director, enter (directly or indirectly) into any contractor arrangement with Scottish Power Plc or any Associated Company (other than subsidiaries of the Appointee) at atime when:                                    
|
|
|  |                                                                                                                                                                                                                                                                                          
|  | (i)     no undertaking complying with paragraph 1 of this condition exists; or                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                          
|  | (ii)     there is an unremedied breach of that undertaking.                                                                                                                                                                                                                              



|Condition Q: Interruptions in Supply because of Drought(coming into effect 29 January 1998)
|-------------------------------------------------------------------------------------------
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|
|
|                                                                                           
|                                                                                           
|
|



| |  | 3.    | Amounts payable to household and business customers                                                                                                                                                                                                    
| |  | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |       |                                                                                                                                                                                                                                                        
| |  | 3.1.1 | The Appointee shall pay to a household customer £10 for each day during which (or during part of which) thesupply is interrupted or cut off.                                                                                                           
| |  |       |                                                                                                                                                                                                                                                        
| |  | 3.1.2 | The amount payable to any household customer in any Charging Year shall not exceed the average amount ofwater charges
payable to the Appointee by household customers for the Charging Year preceding that inwhich the interruption or cutoff happens.
| |  |       |                                                                                                                                                                                                                                                        
| |  | 3.2.1 | The Appointee shall pay to a business customer £50 for each day during which (or during part of which) thesupply
is interrupted or cut off.                                                                                                            
| |  |       |                                                                                                                                                                                                                                                        
| |  | 3.2.2 | The amount payable to any business customer in any Charging Year shall not exceed                                                                                                                                                                     
| |  |       |                                                                                                                                                                                                                                                        
| |  |       | (a)                                                                                                                                                                                                                                                    



|      |                                                                                                                                                                                                                                      | (b) | if that customer was not liable to pay those charges, £500.                                                                                                                                                                                                                                                                                                                                                   
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                      |     |                                                                                                                                                                                                                                                                                                                                                                                                               
|3.2.3 | When calculating the charges payable by a business customer for the supply of water services, amounts payable inrespect
of any separate supply which was provided solely for purposes other than domestic purposes shall beexcluded.
|
|
|      |                                                                                                                                                                                                                                      |     |                                                                                                                                                                                                                                                                                                                                                                                                               
|      | 3.3                                                                                                                                                                                                                                  |     | If, when a payment becomes due under this Condition, a customer owes money to the Appointee and the debt hasbeen
outstanding for more than 6 weeks, any payment from the Appointee to which the customer isentitled under this Condition shall, to the extent that it does not exceed the amount so owed, be made by wayof credit to that customer's
account.                                                 
|
|
|
|      |                                                                                                                                                                                                                                      |     |                                                                                                                                                                                                                                                                                                                                                                                                               
|      | 4.                                                                                                                                                                                                                                   |     | Determination of Disputes                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                      |     |                                                                                                                                                                                                                                                                                                                                                                                                               
|      | 4.1                                                                                                                                                                                                                                  |     | Where any dispute arises between the Appointee and a customer as to the right of that customer to a payment orcredit
under this Condition, the matter may be referred to the Director by either party for determination1.                                                                                                                                                                                     
|
|      |                                                                                                                                                                                                                                      |     |                                                                                                                                                                                                                                                                                                                                                                                                               
|      | 4.2                                                                                                                                                                                                                                  |     | Any determination under this Condition shall be final and, if the Appointee fails to give effect to thedetermination,
the customer may set off the amount in question against any payment which is due to the Appointee                                                                                                                                                                                       
|
|
|
|      |                                                                                                                                                                                                                                      |     |                                                                                                                                                                                                                                                                                                                                                                                                               
|      | 5.                                                                                                                                                                                                                                   |     | Cessation or Modification of this Condition                                                                                                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                      |     |                                                                                                                                                                                                                                                                                                                                                                                                               
|      | 5.1                                                                                                                                                                                                                                  |     | This Condition shall cease to have effect in relation to any interruptions or cutoffs occurring on or after thecommencement date of any Regulations made by the Secretaries of State pursuant to Section 38 of the WaterIndustry Act 1991, implementing the recommendations made to them by the Director in May 1996 for themaking of payments to customers for
interruptions or cutoffs because of drought.
|
|
|
|      |                                                                                                                                                                                                                                      |     |                                                                                                                                                                                                                                                                                                                                                                                                               
|      | 5.2                                                                                                                                                                                                                                  |     | If the Regulations referred to in subparagraph 5.1 relate to either household customers or business customersonly, this Condition shall cease to have effect in so far as it relates to those customers.                                                                                                                                                                                                     
|
|      |                                                                                                                                                                                                                                      |     |                                                                                                                                                                                                                                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                      |     |                                                                                                                                                                                                                                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                      |     |                                                                                                                                                                                                                                                                                                                                                                                                               
|     



|Explanatory Note about Condition Q4                                                                                                                                                                                                     
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                        
|The Director has indicated that, when deciding whether to require the Appointee to make a payment under paragraph 4 ofCondition Q he
will, while not being able to anticipate all relevant circumstances, take account of the following:
|                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                        
|
|                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                        
|
|
|                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                        



| | Guide to Defined Terms                                                                                                                                                                             
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                    
| | 1.The words and expressions set
out in Column (1) below, which are used principally in the Conditions referred to inColumn (2) below, are defined in the provision referred to in Column (3) below:



|(1)                              | (2)                    | (3)                 
|-------------------------------- | ---------------------- | --------------------
|The Appointed Business           | Throughout             | Condition A         
|The Appointee                    | Throughout             | The Appointments    
|The Appointments                 | Throughout             | The Appointments    
|The Auditors                     | B and F                | Condition A         
|Basket Items                     | B                      | Condition B, Part I 
|Charging Year                    | Throughout             | Condition A         
|The Customer Service Committee   | G, H and I             | Condition A         
|Excluded Charges                 | B                      | Condition B, Part I 
|Information                      | Throughout             | Condition A         
|Legal requirement                | B                      | Condition B, Part IV
|Measured Basket Items            | B                      | Condition B, Part I 
|Notified Item                    | B                      | Condition B, Part IV
|Periodic Review                  | B, C, L, N             | Condition A         
|Prior Year                       | B                      | Condition A         
|The Regulated Activities         | B, F, J and L          | Condition A         
|Relevant Change of Circumstance  | B                      | Condition B, Part IV
|The Relevant Charging Year       | B                      | Condition B, Part I 
|Relevant Premises                | D, G, H, I and J       | Condition A         
|The Retail Prices Index          | B, C and N             | Condition A         
|Review Charging Year             | B and N                | Condition A         
|Standard Charges                 | B                      | Condition B, Part I 
|Unmeasured Basket Items          | B                      | Condition B, Part I 
|The Water Authority              | B, C, D, E, F, J and L | Condition A         
|Weighted Average ChargesIncrease | B                      | Condition B, Part I 
|







|Guide to Defined Terms cont.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|2.The definitions of other words and expressions used in the
Conditions may be found either in this instrument or, by virtue ofparagraph 1 of Condition A, in the Act or in the Interpretation Act 1978. The words and expressions set out in Column (1) below,which are
used principally in the Conditions referred to in Column (2) below, are defined in the provision of the Act or of theInterpretation Act 1978 referred to in Column (3)(A) or, as the case may be, Column (3)(B) below:

|                              |                |                                                     |                       |                                                     |  | 
|----------------------------- | -------------- | --------------------------------------------------- | --------------------- | --------------------------------------------------- |  | 
|(1)                           | (2)            | (3)(A)                                              |                       | (4)                                                 |  | 
|                              |                | Relevant provision of the

Water Industry Act

1991 |                       | Relevant provision of the

Interpretation Act

1978 |  | 
|                              |                |                                                     |                       |                                                    
|Accessories                   | B and J        | s. 219                                              | (1)                   |                                                     |  | 
|customer or potentialcustomer | E              | s. 219                                              | (1)                   |                                                     |  | 
|
|Director                      | throughout     | s. 219                                              | (1)                   |                                                     |  | 
|discharge pipe                | L              | s. 192                                              | (1)                   |                                                     |  | 
|Functions                     | A, B and E     | s. 217                                              | &s.219                |                                                     |  | 
|holding company               | A and F        |                                                     |                       | Companies Act 1985                                  |  | 
|Information                   | A              | s. 219                                              | (1)                   |                                                     |  | 
|CompetitionCommission         | A, B, C, F & N | s. 219                                              | (1)                   |                                                     |  | 
|                              |               
|new appointee                 | B              | s. 12                                               | (6)                   |                                                     |  | 
|Notice                        | Throughout     | s. 219                                              | (1)                   |                                                     |  | 
|public sewer                  | L              | s. 219                                              | (1)                   |                                                     |  | 
|Records                       | A              | s. 219                                              | (1)                   |                                                     |  | 
|resource main                 | L              | s.165                                               | (8), s167& Sch 19,    |                                                     |  | 
|                              |                | para 1                                              |                       |                                                     |  | 
|service pipe                  | H, I and L     | s. 219                                              | (1) and 189(4)        |                                                     |  | 
|sewerage services             | E and I        | s. 219                                              | (1)                   |                                                     |  | 
|sewerage undertaker           | Throughout     | s. 11                                               | and 189(l)            |                                                     |  | 
|special administrator         | K              | Sch 6                                               | , para 12(2)          |                                                     |  | 
|special administration        | K              | s.25                                                | (6), Sch 5, para l(4) |                                                     |  | 
|order                         |                | Sch 6                                               | , para 12(2)          |                                                     |  | 
|subordinate legislation       | B and L        | s. 219                                              | (1)                   | s. 21(1)                                            |  | 
|Subsidiary                    | A              | s. 219                                              | (1)                   |                                                     |  | 
|successor company             | A              | s. 219                                              | (1)                   |                                                     |  | 
|transfer date                 | throughout     | s. 219                                              | (1)                   |                                                     |  | 
|trunk main                    | F and L        | s. 219                                              | (1)                   |                                                     |  | 
|water mains                   | B, J and L     | s. 219                                              | (1)                   |                                                     |  | 
|water undertaker              | throughout     | s. 11                                               | and 189(l)            |                                                     |  | 
|Writing                       | B, J, M and N  |                                                     |                       | s. 5 and Schedule 1                                 |  | 





|3.           The lists of words and expressions under in the Conditions in paragraph 1 and 2 above are not exhaustive lists of all the wordsand expressions used in the Conditions which are defined in this instrument, the Act or the Interpretation Act 1978.
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|                                                                                                                                                                                                                                                                
|4.           This guide to defined terms is for ease of reference only and shall not affect the construction of any provision of this                                                                                                                           
|instrument.