Document:

EX-10.1.1

 

Exhibit 10.1.1

DEPARTMENT OF THE ENVIRONMENT

Instrument of Appointment by

the Secretary of State for the Environment

of The Bournemouth and District Water Company (now

Bournemouth and West Hampshire Water plc)

as a water undertaker under the Water Act 1989

Department of the Environment

                     August 1989

 

 

INSTRUMENT OF APPOINTMENT OF THE BOURNEMOUTH AND DISTRICT WATER COMPANY (now Bournemouth and
West Hampshire Water plc from 1.7.94) AS A WATER UNDERTAKER

This publication contains the full text of the Instrument of Appointment of Bournemouth and West
Hampshire Water plc as a water 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

 

 

Table Of Contents

The Appointments

Schedule 1: Area for which the Appointments are made

Schedule 2: Conditions of the Appointments

	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 Biwater Capital PLC as the owner of the Appointee
	 
	Q.	 	Interruptions in Supply Because of Drought

Guide to Defined Terms

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	 	Page
	The Appointments	 	 
	 
	 	 	 	 
	 

	 	The Appointments to be a water undertaker	 	 
	 
	 	 	 	 
	Schedule 1: Area For Which The Appointments Are Made	 	 
	 
	 	 	 	 
	1.

	 	The Water Supply Area	 	 
	 
	 	 	 	 
	2.

	 	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

Condition B: Charges

Part I. Explanatory Provisions

	1.	 	Introduction
	 
	2.	 	Defined terms which apply for the purposes of all Parts of Condition B

Part II. Restriction of Standard Charqes for Basket Items

	4.	 	The Charges Limit (RPI + K)
	 
	5.	 	Matters Affecting the Charges Limit and the calculation of the Weighted Average Charges
Increase
	 
	6.	 	Verification of compliance with the Charges Limit
	 
	7.	 	Transitional Provisions

Part III. Periodic Reviews

	8.	 	Periodic Reviews of the Appointed Business initiated by the Director at Five-yearly Intervals
	 
	9.	 	Periodic Reviews of the Appointed Business at regular Ten-yearly Intervals
	 
	10.	 	Periodic Reviews of the Appointed Business initiated by the Appointee at Five-yearly
Intervals
	 
	11.	 	Periodic Reviews of the Appointed Business where a Termination Notice has been given

 

 

	12.	 	Effect of termination of the Appointment on Periodic Reviews

Part IV. Interim Determinations

	13.	 	Matters of Interpretation and construction which apply for the purposes of Part IV
	 
	14.	 	References to the Director relating to Notified Items and Relevant Changes of Circumstance
and Circumstances having a substantial adverse effect on the Appointed Business.
	 
	15.	 	Changes to the Adjustment Factor initiated by the Director relating to Notified Items and
Relevant Changes of Circumstance

Part V. References to the Monopolies Commission and Modification of Condition B

	16.	 	References to the Monopolies Commission
	 
	17.	 	Modification of Condition B following Periodic Reviews and references to the Director or the
Monopolies 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
	 
	2.	 	Level of Infrastructure Charges
	 
	3.	 	[no heading]
	 
	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 Monopolies Commission
	 
	15.	 	Modification of this Condition

Appendix: Calculation of Relevant Multiplier

Explanatory Note

Condition D: Charges Schemes

	1.	 	Interpretation and Construction
	 
	2 & 3.	 	 Requirement to have in effect a charges scheme
	 
	4.	 	Provisions required to be included in charges schemes relating to Water 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
	 
	2.	 	Prohibition of undue preference and undue discrimination in relation to classes of customer
	 
	3.	 	Prohibition of undue preference and undue discrimination in relation to individual customers
	 
	4.	 	Requirement to provide Information to the Director about compliance with the Condition
	 
	5.	 	Requirement to provide Information to the Director about supplies, services and functions to
which the Condition applies
	 
	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
	 
	2.	 	Interpretation and Construction
	 
	3.	 	Accounting Records
	 
	4.	 	Accounting Statements
	 
	5.	 	Segmental Information
	 
	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
	 
	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 Monopolies Commission

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
	 
	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
	 
	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.	 	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”
	 
	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

	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 IV. Publication of Information

	13.	 	Publication of Levels of Service Information and Service Target Reports

Condition K: “Ring Fencing”, Disposals Of Land And Changes Of Use Of Land

	1.	 	Introduction
	 
	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.	 	Changes of use of protected land
	 
	8.	 	Disclosure of Information to Valuers

Condition L: Underground Asset Management Plans

	1.	 	Interpretation and Construction
	 
	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
	 
	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
	 
	2.	 	Fees
	 
	3.	 	Limit on renewal fee and special fee
	 
	4.	 	Retail Prices Index

Condition O: Circumstances In Which A Replacement Appointment May Be Made

	 	 	Requirement to give at least 10 years’ notice, expiring not earlier than 25 years after the
transfer date, to terminate either Appointment

Condition P: The Role Of Biwater Capital Plc As The Owner Of The Appointee

	1.	 	The procurement and contents of the undertaking
	 
	2.	 	Production of the undertaking to the Director General
	 
	3.	 	Duty to inform Director General if no longer enforceable or breached

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 Condition Explanatory Note

Guide To Defined Terms

 

 

THE APPOINTMENT

	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 Bournemouth and West Hampshire Water Plc (“the Appointee”) to be
the water undertaker for the area described in paragraph 1 of Schedule 1 subject to the
Conditions set out in Schedule 2.
	 
	2.	 	The appointment contained in this instrument (“the Appointment”) shall come into force on the
day appointed as the transfer date under section 4 of the Act.

	 	 	 	 	 
	Authorised by the 
	 	 	 	 
	 

	 	 

R.S. DUDDING
	 	 
	Secretary of State to

	 

	An Assistant Secretary in the Department of the	 	 
	sign in that behalf

	 	Environment	 	 
	 
	 	 	 	 
	 

	 	August 1989	 	 

 

 

SCHEDULE 1: Area for which the Appointment is made

	1.	 	The Water Supply Area
	 
	1.1	 	The area for which the Appointee is appointed to be the water undertaker (“the Water Supply
Area”) comprises:

	 	(1)	 	the area the boundaries of which (other than the seaward boundary) are
more particularly delineated by the line shaded pink in the Water Supply Area Maps
and the seaward boundary of which is as described in sub-paragraph 1.2; and
	 
	 	(2)	 	those islands (if any) within the Appointee’s limits of supply for the
purposes of section 12 of the 1973 Act immediately before the transfer date;
	 
	 	(3)	 	the premises and installations listed in the Appendix to this schedule

	1.2	 	The seaward boundary of the area described in sub-paragraph 1.1(1) and of the islands
referred to in sub-paragraph 1.1(2) is the seaward boundary of the area and of the islands
within the Appointee’s limits of supply for the purposes of section 12 of the 1973 Act
immediately before the transfer date.
	 
	2.	 	Interpretation and Construction
	 
	 	 	In this Schedule:

	 	 	 	“the 1973 Act” means the Water Act 1973;
	 
	 	 	 	“the Water Supply Area Map” means the maps signed on behalf of the Secretary of
State accompanying and forming part of this instrument numbered 11 W
1- 11 W la - 11
W l d inclusive; 36 W 1, 36 W la - 36 W lb inclusive, and 36W2;
	 
	 	 	 	words and expressions used in this Schedule shall have the same meaning as in any
provision of the 1973 Act.

SCH— 1: 1

 

APPENDIX

The premises edged and hatched [red] on the Water Supply Map are not 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). Those 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.

Additional premises and installations outside the boundary of the Water Supply Area Map but
comprised in the Water Supply Area

                                                                     
                     GRID REFERENCE

2 Drinking troughs, Home Farm, Poulton’s                                                             SU311179

Estate, Ower, Hampshire

Blackwater Cottage and Trough, Back Lane,                                                            SU292094

Emery Down, Hampshire

SCH— 1: 2

 

Note:(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

SCH— 1: 3

 

SCHEDULE 2: Conditions of the Appointment

Condition A: Interpretation and Construction

	1.	 	Unless the contrary intention appears:

	 	(1)	 	words and expressions used in these Conditions and references in these
Conditions to enactments shall be construed as if they were in an Act of Parliament
and the Interpretation Act 1978 applied to them;
	 
	 	(2)	 	references in these Conditions to enactments shall include any statutory
modification thereof after the Appointment Date;
	 
	 	(3)	 	words and expressions used in these Conditions shall have the same
meaning as in any provision of the Act;
	 
	 	(4)	 	references in these Conditions to sections and Schedules are references
to sections of, and Schedules to, the Act;(the reference in parenthesis is updated
to show the relevant provision(s) of the Water Industry Act 1991 “the 1991Act” or
the Water Resources Act 1991) and
	 
	 	(5)	 	references in these Conditions to paragraphs are references to paragraphs
of the Condition in which the reference appears and references to sub-paragraphs are
references to sub-paragraphs of the paragraph in which the reference appears.

	2.	 	In construing these Conditions:

	 	(1)	 	the heading or title of any Condition or of any paragraph of any
Condition shall be disregarded; and
	 
	 	(2)	 	any description of the purposes of a Condition shall be construed subject
to the provisions of the rest of the Condition in which that description appears.

	3.	 	Unless the context otherwise requires, in these Conditions:

	 	 	 	“the 1985 Act” means the Companies Act 1985;
	 
	 	 	 	“the Appointed Business” means the business consisting of the carrying out by the
Appointee of the Regulated Activities;
	 
	 	 	 	“the Area” means the area for which for the time being the Appointee holds the
appointment as water undertaker;
	 
	 	 	 	“Associated Company” means any Group Company or Related Company;
	 
	 	 	 	“the Auditors” means the Appointee’s auditors for the time being appointed in
accordance with the 1985 Act;

B4

 

	 	 	 	“books and records” means any and all books, records, files, maps, plans, documents,
papers, accounts, estimates, returns and other data of 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 Act)
	 
	 	 	 	“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 7, 8 or 9 or ten 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 10 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 15 of Condition B following
the giving of a Review Notice under paragraph 7 or the giving of Information to the
Director in accordance with paragraph 8 or a reference under paragraph 9;
	 
	 	 	 	“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 9, 10 or 13
of Condition B;
	 
	 	 	 	“the Regulated Activities” means the functions of a water undertaker and, for the
avoidance of doubt, references to the functions of a water undertaker shall include
references to the duties imposed on a water undertaker;

B5

 

	 	 	 	“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 and for this purpose references in that paragraph to a “company” shall
be deemed to include references to any body corporate;
	 
	 	 	 	“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;
	 
	 	 	 	“Water Infrastructure Charge” means such a charge as is described in section
79(2)(a).(section 146 of 1991 Act)

	4.	 	Any notification required or permitted to be given under any Condition shall be given in
writing and cognate expressions shall be construed accordingly.
	 
	5.	 	The Appointee may refer to the Director for determination by him (having considered any
representations by the Appointee and any other water undertaker) any question arising as to
whether any area, island, premises or installation is, or, as the case may be, are, comprised
within the Water Supply Area as that expression is defined in Schedule 1 to this instrument.

B6

 

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
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 5 or
10 five-yearly intervals, so that the Director can determine whether the Adjustment Factor
should be changed. Except as where expressly provided in this Condition all reviews will cover
periods of ten five consecutive years. This is dealt with in Part III under the heading
“Periodic Reviews.” (strikethrough and highlighted italics effective from 1 April 2000)
	 
	1.3	 	To enable the Appointee:

	 	(1)	 	To refer to the Director for determination at 5 yearly intervals the
question whether the Adjustment Factor should be changed;(strikethrough and
highlighted italics effective from 1 April 2000)
	 
	 	(2)	 	to refer to the Director for determination from time to time the question
of changing the Adjustment Factor to allow for Notified Items and Relevant Changes
of Circumstance;
	 
	 	(3)	 	to refer to the Director for determination at any time the question of
changing the Adjustment Factor where circumstances have a substantial adverse effect
on the Appointed Business; and
	 
	 	(4)	 	where notice to terminate the Appointment has been given, to refer to the
Director for determination the question what the Adjustment Factor should be in the
future, on the assumption that the Appointment was to continue in force, for the
purpose of facilitating consideration of the terms on which a new

B8

 

	 	 	 	appointee could accept transfers of property, rights and liabilities from the
Appointee, as provided in section 12(4) (section 9(4) of 1991 Act).

	 	 	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 Relevant Changes 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 of determinations 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 and Modification 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 of all parts of this Condition
	 
	 	 	In this Condition:

	 	 	 	references to “the Appointed Business” shall be construed as if the Appointed
Business included the management and holding 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 amount R/N where:
	 
	 	 	 	R is 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; and
	 
	 	 	 	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, provided that,
where the specified year is a Prior Year,

	 	(a)	 	there shall be included in N the number of any additional
Chargeable Supplies which the Appointee would have made as at such 1st December
if the Standard Charges to be made in respect of the Unmeasured Basket Item in
the relevant Charging Year had applied; and
	 
	 	(b)	 	there shall be excluded from N the number of any Chargeable
Supplies which the Appointee would not have been entitled to make as at such
1st

B9

 

	 	 	 	December if the Standard Charges to be made in respect of the Unmeasured
Basket Item in the relevant Charging Year had applied.

	 	 	“Basket Items” means the Measured Basket Item and the Unmeasured Basket Item;
	 
	 	 	“Chargeable Supply” means any supply of water 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 unmeasured supplies of water to cattle troughs;
	 
	 	(4)	 	charges for unmeasured building water supplies;
	 
	 	(5)	 	amounts payable in respect of an unmeasured supply of water by means of
bowsers or water tankers; and
	 
	 	(6)	 	charges for unmeasured supplies of water to farm taps and other
agricultural water points; and
	 
	 	(6A)	 	 Charges in any Charging Year for supplies of water (or for the provision of
sewerage services or for the reception, treatment and disposal of trade effluent) to
premises where the premises were supplied in the relevant Weighting Year with not less
than such quantity of water as is specified from time to time under section 7(5)(a) of
the Water Industry Act 1991

	 	14.2	 	Where sub-paragraph 13.4(2) or 14.1(2) applies, the questions set out in (5) to (9) inclusive
of sub-paragraph 13.2 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.
	 
	 	 	 	AND, for the avoidance of doubt, but without prejudice to the meaning of Standard Charges in
respect of Basket Items, shall also include

	 	(7)	 	charges payable for any such connection as is described in section
79(2)(a) (section 146 of the 1991 Act);
	 
	 	(8)	 	charges for a supply of water in bulk to another water undertaker;
	 
	 	(9)	 	amounts payable under any such agreement as is described in section
126(1)(b) (section 20 (1)(b) of the Water Resources Act 1991) and;

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	 	(10)	 	charges payable under any agreement for any unmeasured supply of water
which are calculated by reference to the rateable value of hereditaments, occupied
by the person to whom the supply is 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 (9) 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);

	 	 	“The Initial Determination” means the determination by the Secretary of State after the
transfer date and before 1st April 1990 of the Adjustment Factor for each Charging Year
starting with the Charging Year starting on the 1st April 1990;
	 
	 	 	“Measured Basket Items” means measured water supply;
	 
	 	 	a “measured supply” is one where all or some of the charges for that supply are based on
measured quantities of volume and an “unmeasured supply” is any other;
	 
	 	 	“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), under or for which all the charges payable are in
accordance with standard charges published or fixed by the Appointee;

B11

 

	 	(3)	 	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;
	 
	 	(4)	 	charges fixed under any such charges scheme made by the Appointee 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;
	 
	 	(5)	 	charges in respect of any such supply which the Appointee 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 Appointee;
and
	 
	 	(6)	 	charges payable under any agreement made or entered into by the Appointee
under any local statuary provision or under any other power conferred upon the
Appointee otherwise than by virtue of the Act, under which all the charges payable
are in accordance with standard charges published or fixed by the Appointee 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 (4) of this
definition the words “and any charges scheme made by the Appointee
under 31 of the 1973 Act”;
	 
	 	(b)	 	there were added to sub-paragraph (5) of this
definition the words “and any such supply which the Appointee was under
a duty to make under section 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 Appointee”; and

	 	 	 	Provided that no part of this definition shall apply to any charge which is for the
time being an Excluded charge which is for the time being an Excluded Charge by
virtue of (7A) of the definition of Excluded Charges.
	 
	 	 	 	In this definition references to standard charges published or fixed by the
Appointee or the Water Authority are to such charges, where published or fixed under
a charges scheme or otherwise;

	 	 	“Termination Notice” means a notice given in accordance with Condition O;
	 
	 	 	“the Unmeasured Basket Items” means unmeasured water supply;
	 
	 	 	“Weighted Average Charges Increase” means the sum calculated as follows:

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	 	 	 	where
	 
	 	 	 	Wt is the Weighted Average Charges Increase for the Charging Year
	 
	 	 	 	i identifies the Unmeasured Basket Item
	 
	 	 	 	j identifies the Measured Basket Item
	 
	 	 	 	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 the Measured Basket Item, 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.

Part II. Restriction of Standard Charges for Basket Items

	3.	 	The Charges Limit
	 
	3.1	 	The Appointee shall ensure that the Weighted Average Charges Increase in any Charging Year
(beginning with the Charging Year starting on 1st April 1990) when expressed as a percentage
does not exceed the Charges Limit.
	 
	3.2	 	The Charges Limit is the percentage calculated as RPI + K, where

B13

 

	 	 	 	RPI is the percentage change (expressed, in the case of an increase, as a positive
number, in the case of a decrease, as a negative number and, in the case of no
change, as zero) in the Retail Prices Index between that published for the month of
November in the Prior Year and that published for the immediately preceding
November.
	 
	 	 	 	K is the Adjustment Factor.

	3.3	 	On the coming into force of the Appointment there shall be referred to the Secretary of State
for determination by him the question of what the Adjustment Factor for each of the 10
consecutive Charging Years starting with the Charging Year starting on the 1st April 1990
should be.

Note:

For the purposes of Condition B3.3, the Adjustment Factors for the Charging Years beginning on 1st
April in the years shown below shall be:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	BNH	 	WHS	 	BWH	 	 	 	 	 	 	 	 	 	 	 	 
	1990
	 	 	 	 	 	 	18.5	 	 	 	7.5	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	1991
	 	 	 	 	 	 	18.5	 	 	 	7.5	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	1992
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	13.5	 	 	 	 	 	 	 	 	 	 	 	 	 
	1993
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.0	 	 	 	 	 	 	 	 	 	 	 	 	 
	1994
	 	 	(26.10.92	)	 	 	 	 	 	 	 	 	 	 	1.0	 	 	 	 	 	 	 	 	 	 	 	 	 
	1995
	 	 	(28.07.94	)	 	 	 	 	 	 	 	 	 	 	-0.5	 	 	 	 	 	 	 	 	 	 	 	 	 
	1996
	 	 	“	 	 	 	 	 	 	 	 	 	 	 	-0.5	 	 	 	 	 	 	 	 	 	 	 	 	 
	1997
	 	 	“	 	 	 	 	 	 	 	 	 	 	 	-0.5	 	 	 	 	 	 	 	 	 	 	 	 	 
	1998
	 	 	“	 	 	 	 	 	 	 	 	 	 	 	-0.5	 	 	 	 	 	 	 	 	 	 	 	 	 
	1999
	 	 	“	 	 	 	 	 	 	 	 	 	 	 	-0.5	 	 	 	 	 	 	 	 	 	 	 	 	 
	2000
	 	(PR25.11.99)	 	 	 	 	 	 	 	 	 	 	-0.5	 	 	minus 3	 	 	 	 	 	 	 	 
	2001
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-0.5	 	 	minus l.7	 	 	 	 	 	 	 	 
	2002
	 	(IDOK 2001)	 	 	 	 	 	 	 	 	 	 	-0.5	 	 	minus l.7	 	 	0.4	 	 	 	 	 
	2003
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-0.5	 	 	 	0
	 	 	0.4	 	 	 	 	 
	2004
	 	(ID 19.02.04)	 	 	 	 	 	 	 	 	 	 	-0.5	 	 	 	1.7
	 	 	0.5	 	 	 	4.3	 

(This note does not form part of the licence)

	3.4	 	The Adjustment Factor shall be:

	 	(1)	 	for each of the Charging Years referred to in sub-paragraph 3.3 the
number so determined by the Secretary of State (or such other number as shall from
time to time be determined under this Condition);
	 
	 	(2)	 	for each subsequent Charging Year, such number as shall from time to time
have been determined under this Condition or, if none, zero.

B14

 

	 	 	and the Adjustment Factor may be a different number for any Charging Year and may be a
positive or negative number, or zero.
	 
	3.5	 	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.
	 
	3.6	 	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 3.5 to the extent that such
deficiency is not attributable to any Charging Year ended three or more years previously.
	 
	4.	 	Matters affecting the Charges Limit and the calculation of the Weighted Average Charges
Increase
	 
	4.1	 	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;
	 
	 	(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 for the supply of water, other than Excluded Charges); or
	 
	 	(3)	 	to change the basis on which the Appointee treats supplies of water as
separate supplies for the purpose of making Standard Charges (other than Excluded
Charges) which affects the calculation of Average Charge Per Chargeable Supply
	 	 	 	 
it shall:

	 
	 	(a)	 	notify the Director; and
	 
	 	(b)	 	furnish to the Director such explanations and Information
relating to such change as the Director considers requisite or expedient having
regard to the purposes of this Condition

	4.2	 	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.

B15

 

	5.	 	Verification of Compliance with the Charges Limit
	 
	5.1	 	Statements
	 
	 	 	The Appointee shall deliver to the Director the following statements:

	 	(1)	 	not later than the relevant date specified in sub-paragraph 5.2, a
statement in writing (a “Principal Statement”) of:

	 	(a)	 	the revenue which accrued in the Weighting Year from all
Standard Charges (including, in the case of Measured Basket Items, any
Non-volumetric Charge), other than Excluded Charges, in respect of each
Unmeasured 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, which the Appointee proposes to make of a kind specified in
the definition of “Standard Charges” as at the commencement of that Charging
Year which are not Excluded Charges (and for this purpose where the Appointee
proposes to charge different prices per cubic metre of water supplied depending
upon the volume of water supplied or the time of supply or the category of
customer or any other variable factor then each such price shall be treated as
a different type or category of charge); and

	 	(2)	 	not later than two months, or such later date as the Director may allow,
before the date during any Charging Year 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 to increase or decrease the amount of any such charge a statement in
writing (a “Supplemental Statement”) of the new charge or the amount by which the
Appointee proposes 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.
	 
	5.2	 	The relevant date for the purpose of sub-paragraphs 5.1(1) is:

	 	(1)	 	in the case of the Principal Statement required to be delivered in
respect of the Charging Year starting on 1st April 1990, the latter of:

	 	(a)	 	the date which is one month from the date of the Secretary of
State’s determination under sub-paragraph 3.3; and
	 
	 	(b)	 	1st February 1990;

B16

 

	 	(2)	 	in the case of the Principal Statement required to be delivered in
respect of all subsequent Charging years, the date which is two months before the
start of the relevant Charging Year.

	5.3	 	Auditor’s 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
5.1(1)(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 with that Principal Statement are in
accordance with this Condition and with the Appointee’s accounting and such other relevant
records.
	 
	6.	 	Transitional Provisions
	 
	6.1	 	Save with the prior written approval of the Director or as permitted under the terms of any
agreement or arrangement entered into or made by the Appointee before the transfer date, the
Appointee shall not increase the amount of any Standard Charge (other than an Excluded Charge)
for any supply of water provided at any time before 1st April 1990 or in respect of any period
ending before that date from the amount of such Standard Charge as at the transfer date.

Part III. Periodic Reviews

	7.    Periodic Reviews of the Appointed Business Initiated by the Director at five yearly intervals
	 
	7.1   Where the Director so requires by notice to the Appointee (a “Review Notice”) given at any
time on or before the Review Notice Date the Appointee shall furnish to the Director such
information as the Director may reasonably require to enable him to carry out a Periodic
Review for the purpose of determining the question whether (having regard to all tie
circumstances which are relevant in the light of the principles which apply by virtue of Part
I of the Act in relation to the Director’s determination, including, without limitation, any
change in circumstance which has occurred since the Initial Determination or, as the case may
be, the last Periodic Review or which is to occur) the Adjustment Factor should be changed
(and if so what change should be made to the Adjustment Factor) for the ten consecutive
Charging Years starting on 1st April 1995 or any such later date specified in the
relevant Review Notice which is the fifth anniversary of:

	 	(1)  1st April 1995; or

	 
	 	(2)  the first day of the first of the Charging Years in respect of which the
last Periodic Review was carried out.

B17

 

	7.2  The Appointee shall furnish to the Director not later than 31st March immediately following
the Review Notice Date such Information as the Director may reasonably require in the Review
Notice to enable him to carry out the Periodic Review. 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 enable him to carry out the
Periodic Review.

	 
	7.3  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
give a Review Notice.

	 
	8.	 	Periodic Reviews of the Appointed Business at Regular Five Ten yearly Intervals
	 
	8.1	 	The Appointee shall furnish to the Director such Information as the Director may reasonably
require to enable him to carry out a Periodic Review for the purpose of determining the
question whether (having regard to all the circumstances which are relevant in the light of
the principles which apply by virtue of Part I of the Act in relation to the Director’s
determination including, without limitation, any change in circumstance which has occurred
since the Initial Determination or, as the case may be, the last Periodic Review or which is
to occur) the Adjustment Factor should be changed (and if so what change should be made to the
Adjustment Factor) for:

	 	(1)	 	the ten five consecutive Charging Years starting on 1st April 2000 2005
or, if a Periodic Review has been carried out for any period starting prior to 1st
April 2000, then the first day of April immediately following the end of that
period; and
	 
	 	(2)	 	each period of ten five consecutive Charging Years starting on the tenth
fifth anniversary of the first day of the period in respect of which the immediately
preceding Periodic Review was carried out.

	8.2	 	The Appointee shall furnish to the Director not later than 31st March immediately following
the Review Notice Date such Information (including further detail about or explanation of
Information previously supplied, whether or not under this sub-paragraph 8.2) as the Director
may reasonably require by notice reasonably require to the Appointee on or before the Review
Notice Date to enable him to carry out the Periodic Review and, as soon as reasonably
practicable, such further Information as the Director may from time to time by notice to the
Appointee reasonably require to enable him to carry out the Periodic Review.
	 
	9.    Periodic Reviews of the Appointed Business Initiated by the Appointee at Five Year Intervals

	 
	9.1   Subject to sub paragraph 9.2, the Appointee may refer to the Director for determination by
him the question whether (having regard to all the circumstances which are relevant in the
light of the principles which apply by virtue of Part I of the Act in relation to the
Director’s determination, including, without limitation, any change in circumstance which has
occurred since the Initial Determination or, as the case may be, the last

B18

 

	 	 	Periodic Review or which is to occur) the Adjustment Factor should be changed (and if so
what change should be made to the Adjustment Factor) for the ten consecutive Charging Years
starting with the Relevant Charging Year.

	9.2   No reference may be made under sub-paragraph 9.1 if the Director shall have given a Review
Notice to the Appointee under sub-paragraph 7.1 in respect of the period of ten consecutive
Charging Years beginning with the next Relevant Charging Year.

	 
	9.3	 	A reference to the Director under this paragraph 9 shall be made by notice given to the
Director not earlier than 2nd January and not later than 14th January immediately following
the Review Notice Date.
	 
	10.	 	Periodic Reviews of the Appointed Business where a Termination Notice has been given
	 
	10.1	 	Where a Termination Notice has been given by the Secretary of State to the Appointee, the
Appointee may refer to the Director for determination by him the question whether, on the
assumption that such a Termination Notice had not been given, (but subject thereto, having
regard to all the circumstances which are relevant in the light of the principles which apply
by virtue of Part I of the Act in relation to the Director’s determination, including, without
limitation, any change in circumstance which has occurred since the Initial Determination or,
as the case may be, the last Periodic Review or which is to occur) the Adjustment Factor
should be changed (and if so what change should be made to the Adjustment Factor) for the ten
consecutive Charging Years starting with the Charging Year starting 1st April last before the
Termination Notice is to expire.
	 
	10.2	 	A reference to the Director under this paragraph 10 shall be made by notice given to the
Director not earlier than 1st July and not later than 14th July in the Charging Year next but
one before that commencing on the said 1st April.
	 
	11.	 	Effect of Termination of the Appointment on Periodic Reviews
	 
	 	 	Subject to paragraph 10, if the Secretary of State shall have served a Termination Notice on
the Appointee then this Condition shall have effect as though, references to a Periodic
Review being carried out in respect of a period of tee five consecutive Charging Years were
references to a Periodic Review being carried out in respect of the relevant Appointment in
respect of a period of that number of consecutive Charging Years which is the lesser of:

	 	(1)   ten; five and

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

B19

 

Part IV: Interim Determinations

	12.	 	Matters of Interpretation and Construction which apply for the purposes of this Part IV
	 
	12.1	 	In this Part of this Condition:
	 
	 	 	“the Appropriate Discount Rate” means such rate of return upon borrowing as, at the time at
which the Appropriate 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 of being a water undertaker and,
without excluding other considerations which may also be relevant, having its equity share
capital listed on The International Stock Exchange of the United Kingdom and the Republic of
Ireland Limited, and the same Appropriate Discount Rate shall be applied for all purposes in
determining questions the subject of the same reference (including questions determined by
the Director under paragraph 14 when he determines questions referred to him by the
Appointee under paragraph 13);
	 
	 	 	“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 13 or pursuant to paragraph 14
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
sub-paragraph 15(2) or 15(3), which relates to a reference by the Appointee under paragraph
13 or a determination pursuant to paragraph 14;
	 
	 	 	“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 13 but the Director gives a notice to the Appointee under paragraph
14, 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)	 	where any such item was not allowed for in full then it shall
only be a Notified Item to the extent that it was not allowed for; and

B20

 

	 	(b)	 	where, in determining whether the Adjustment Factor should be
changed (and if so what change should be made to the Adjustment Factor), the
Director, or, as the case may be, the Competition Commission, allows for any
such item as was previously so notified by the Director then references in this
Condition to Notified Items and Relevant Items shall be taken, for the purposes
of any subsequent Interim Determination, to exclude such item to the extent
that the Director, or, as the case may be, the Competition Commission, allowed
for it as aforesaid;

	 	 	a “Relevant Change of Circumstance” is any of the following:

	 	(1)	 	(a) the application to the Appointee of any legal requirement; and

	 	(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
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 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 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.

B21

 

	 	 	 	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;

	 	(iv)	 	“protected land” and “disposal” have the meanings respectively
given to them in section 189 (section 219 of the 1991 Act);
	 
	 	(v)	 	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 a Relevant 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;
	 
	 	(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

B22

 

	 	 	 	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 sub-paragraph,
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;
	 
	 	(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 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 from
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

B23

 

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

	12.2	 	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 as a water undertaker (and for this
purpose, but without prejudice to the generality 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, by
the 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 that it applies to the Appointee in its
capacity as a water undertaker, or decision taken by the said Commission which
is binding on the Appointee in its capacity as a water 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;
	 
	 	(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

B24

 

	 	(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 had
effect; 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:

	 	(i)	 	any such legal requirement as is referred to in
section 129 (sections 123 and 124 of the Water Resources Act 1991).
	 
	 	(ii)	 	that section

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

	 	(2)	 	“enforcement authority” means any person or body having jurisdiction to
enforce or to take action under or in respect of the relevant legal requirement.

	12.3	 	In paragraph 13 and in the definition of a “Relevant Change of Circumstance”:

	 	(1)	 	references to costs include references to expenditure and loss of revenue
and references to costs being incurred include references to expenditure being made
and loss of revenue being suffered; and
	 
	 	(2)	 	references to receipts include references to receipts, cash or other
assets of any sort, whether of a capital or revenue 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 those items currently so identified in Regulatory
Accounting Guidelines 3 and 4 and in the July Return 1999 Reporting Requirement,
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 are excluded. (effective
5.8.2000)

B25

 

	12.4	 	(1) For the purposes of sub-paragraphs 13.2(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 13.1, or the director gives
notice under paragraph 14(1).

	 	(2)	 	In sub-paragraphs 13.2(8) and 13.2(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 13.1 or the Director gives notice under paragraph 14.1(.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 13.2(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.

	12.5	 	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.
	 
	13.	 	References to the Director relating to Notified Items and Relevant Changes of Circumstance
and circumstances having a substantial effect on the Appointed Business
	 
	13.1	 	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 13.2 or as
the case may be, sub-paragraph 13.3. Such reference shall be made by notice given to the
Director, which, in the case of the questions set out in sub-paragraph 13.2 shall be given in
accordance with sub-paragraph 13.4. For the purposes of sub-paragraph 13.2 a single reference
may be made in respect of any number of Notified Items and Relevant Changes of Circumstance
and sub-paragraph 13.2 shall be construed accordingly.”
	 
	13.2	 	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)	 	what are, or are likely to be, the costs, receipts and savings reasonably
attributable to the Relevant Item and also, in the case of a Relevant Change of

B26

 

	 	 	 	Circumstance falling within sub-paragraph (2) of the definition, the costs,
receipts and savings reasonably connected with the Relevant Disposal of Land;
	 
	 	(2)	 	except in the case of a Relevant Change of Circumstance falling within
sub-paragraph (2) of the definition, to what extent:

	 	(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 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 carried out by, and other activities
of, the Appointee as a water undertaker which are not Basket 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 the Relevant Item is relevant as aforesaid, either in
full or to an extent, then references hereafter to costs, receipts and savings
reasonably attributable to a Relevant Item are to those costs, receipts and savings
except to that extent;

	 	(3)	 	both of the following:

	 	(a)	 	what costs reasonably attributable to, or connected with, the
Relevant Item as determined under (1) and what timing of incurring of such
costs are appropriate and reasonable for the Appointee in all the circumstances
to incur and programme, or, as the case may be to have incurred and programmed,
by reason of the Relevant Item; and
	 
	 	(b)	 	what receipts and savings reasonably attributable to, or
connected with, the Relevant Item as determined under (1) and what timing of
such receipts and savings is appropriate and reasonable for the Appointee in
all the circumstances to achieve and programme or, as the case may be, to have
achieved and programmed, by reason of the Relevant Item

	 	 	 	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)	 	any trivial amounts;
	 
	 	(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

B27

 

	 	 	 	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 the 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 13.1;

	 	(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 13.4 or
paragraph 14;

B28

 

	 	(6)	 	(a) where any part of an annual aggregate derived under sub-paragraph (5)
consists of items to which (b) below does not apply, what is the Net Present Value
of that part of the annual aggregate, 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 part of the annual aggregate derived under sub-paragraph (5) consist
of revenue and/or Operating Expenditure, what is the Net Present Value of that part
of the annual aggregate, calculated over 15 years; and
	 
	 	 	 	(c) what is the aggregate of the Net Present Values calculated
under (a) and (b) (“the Materiality Amount”);

	 	(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)	 	what are the following amounts:

	 	(i)	 	all Base Cash Flows at Outturn Prices
attributable to the creation or acquisition of depreciable assets
(“Allowable Capital Expenditure”);
	 
	 	(ii)	 	all the Base Cash Flows at Outturn Prices (save
in respect of Relevant Changes of Circumstance falling within
sub-paragraph (2) of that definition, where one half of the Base Cash
Flow at Outturn Prices shall be used) attributable to the creation,
acquisition or disposal of non-depreciable assets (“Allowable
Infrastructure Asset Expenditure”);
	 
	 	(iii)	 	all other Base Cash Flows at Outturn Prices
(“Other Allowable Expenditure”);
	 
	 	(iv)	 	the sum of the Current Value of all Allowable
Capital Expenditure occurring up to and including the relevant year,
divided by the weighted average expected life of the assets
attributable to that Allowable Capital Expenditure at the time those
assets were or are expected to be created or acquired (“Allowable
Depreciation”);

B29

 

	 	(v)	 	the sum of the Current Value of all Allowable
Capital Expenditure occurring up to and including the relevant year
less the sum of the Current Value of all Allowable Depreciation
occurring up to and including the relevant year (“Allowable Net Asset
Value”);
	 
	 	(vi)	 	the sum of the Current Value of 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 the Retail Price Index,
multiplied by the sum of:

	 	A.	 	the Allowable Net Asset Value for
the relevant year; and
	 
	 	B.	 	the Allowable Infrastructure
Asset Value for the relevant year;

	 	 	 	(the “Allowable Return”); and

	 	(b)	 	what is the sum of:

	 	(i)	 	Other Allowable Expenditure;
	 
	 	(ii)	 	Allowable Depreciation; and
	 
	 	(iii)	 	the Allowable Return;

	 	 	 	(the “Annual Allowable Amount”);

	 	(9)	 	what change to the Adjustment Factor over the period from the beginning
of the first of the Charging Years referred to in sub-paragraph 13.4(1) (in any case
where a Reference Notice has been given in respect of sub-paragraph 13.2) or
sub-paragraph 14(1) (in any other case) 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) (the “Relevant Period”) is most likely to allow, or, as the case may be,
require, the Appointee to make such charges over the Relevant Period (“Adjusted
Charges”), in such a manner as to secure that the increase, or, as the case may be,
decrease, in revenue attributable to the making of Adjusted Charges would, in each
year of the Relevant Period, be equal to

	 	(i)	 	the Annual Allowable Amount for that year,

	 	 	 	plus

	 	(ii)	 	where Base Cash Flows at Outturn Prices have
occurred prior to the first year of the Relevant Period, the amount,
which, calculated

B30

 

	 	 	 	as a constant annual amount over the Relevant Period, would result in
the sum of the Net Present Values of these amounts equalling the sum
of the Net Present Values of the Annual Allowable Amounts for each of
the years prior to the Relevant Period.

	 	 	 	Provided that -

	 	(a)	 	where costs have been allowed for in
determining the Annual Allowable Amount, it shall be assumed that those
costs will be financed other than by the proceeds of an issue of equity
share capital and
	 
	 	(b)	 	the revenue attributable to the making of
adjusted Charges over the relevant period shall not result in interest
cover which, measured both by its level in any one year and by trends
in that level over time, is less than that appropriate to the financial
position and performance which investors and creditors would reasonably
expect of a properly managed company holding the Appointments, whose
sole business consists of being a water undertaker and having its
equity share capital listed on the stock exchange].

	13.3	 	All of the following:

	 	(1)	 	whether any circumstance (other than a relevant Change of Circumstance)
has occurred which has or will have:

	 	(a)	 	a substantial adverse effect on the Appointed Business or on
its assets, liabilities, financial position, or profits or losses, not being
one which would have been avoided by prudent management action taken since the
transfer date; or
	 
	 	(b)	 	a substantial favourable effect on the Appointed Business, or
on its assets, liabilities, financial position, or profits or losses, being one
which is fortuitous and (ii) not attributable to prudent management action; and

	 	(2)	 	if so, what change should be made to the Adjustment factor.

	 	 	 	For this purpose:

	 	(i)	 	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;
	 
	 	(ii)	 	an effect shall not be regarded as a
substantial adverse effect or a substantial favourable effect in any
case unless, if the questions set out in sub-paragraph 13.2 were to
be asked in

B31

 

	 	 	 	relation to the circumstance giving rise to it, the answer to
that in 13.2(7) (taking the reference in it to ten per cent as a
reference to twenty per cent) would be in the affirmative.

	13.4	 	A Reference Notice given to the Director in respect of sub-paragraph 13.2 shall contain or be
accompanied by reasonable details of the Relevant Item in respect of which the Reference
Notice is given and, unless the Director otherwise consents, shall be given not later than:

	 	(1)	 	the fifteenth day of September immediately preceding the first of the
Charging Years in respect of which the Appointee wishes the change to the Adjustment
Factor to take effect; or
	 
	 	(2)	 	if later, where the Director has given a notice to the Appointee under
paragraph 14.1 in respect of the same Charging Year, within fourteen days from the
receipt by the Appointee of that notice.

	14.	 	Changes to the Adjustment Factor initiated by the Director relating to Notified Items and
Relevant Changes of Circumstance and circumstances within sub-paragraph 13.3(1)(b).
	 
	14.1	 	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)	 	the fifteenth day of September immediately preceding the first of the
Charging Years in respect of which he proposes the change to the Adjustment Factor
to take effect; or
	 
	 	(2)	 	if later, where the Appointee has given a Reference Notice to the
Director in respect of sub-paragraph 13.2 and falling within subparagraph 13.4(1) in
respect of the same Charging Year, within fourteen days from the receipt by the
Director of that Reference Notice

	 	 	determine the questions set out in sub-paragraph 13.2 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 14.1 in respect of any number of Notified Items and Relevant
Changes of Circumstance and sub-paragraph 13.2 shall be construed accordingly.
	 
	14.2	 	Where sub paragraph 13.4(2) or 14.1(2) applies, the questions set out in (5) to (9) inclusive
of subparagraph 133.2 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.
	 
	14.3	 	In the case of sub-paragraph 13.3, the Director shall give notice to the Appointee of his
intention to determine the questions set out in sub-paragraph 13.3(1)(b) and (2).

B32

 

Part V — References to the Competition Commission and Modification of this Condition

	15.	 	References to the Competition Commission
	 
	 	 	Where:

	 	(1)	 	pursuant to following the giving of a Review Notice under paragraph 7 or
the giving of Information to the Director in accordance with paragraph 8 or
following a reference under paragraph 10, the Director has not given notice to the
Appointee of his determination within l one year from the Review Notice Date or, in
the case of a reference under paragraph 10, within 1 one year from the date of the
relevant Reference Notice;
	 
	 	(2)	 	following a reference under paragraph 13, the Director has not given
notice to the Appointee of his determinations (including any determinations under
paragraph 14 which fall to be taken into account in determining the questions the
subject of the reference under paragraph 13) 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 10, 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:

	 	(i)	 	in any case referred to in sub-paragraph (1) or (2), the
relevant question or questions (including, where relevant, the questions in
respect of any Notified Item or Relevant Change of Circumstance the subject of
a notice under paragraph 14); or
	 
	 	(ii)	 	in any case referred to in sub-paragraph (3), the disputed
determination.

	16.	 	Modification of this Condition following Periodic Reviews and references to the Director or
the Competition Commission
	 
	16.1	 	Except in the case of a Periodic Review carried out under paragraph 10, this Condition shall
be modified by the change (if any) to the Adjustment Factor (which may be a

B33

 

	 	 	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.
	 
	16.2	 	Where the Appointee requires the Director to make a reference to the Competition Commission
under paragraph 15 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 16.1 shall then apply to the
determination made by the Competition Commission following such reference.

Part VI. Provision of Information to the Director

	17.1	 	The Appointee shall furnish to the Director:

	 	(1)  not later than 31st March immediately following the date of the relevant
Reference Notice (in the case of a reference under paragraph 9);

	 
	 	(2)	 	not later than 30th September immediately following the date of the
Reference Notice (in the case of a reference under paragraph 10);
	 
	 	(3)	 	at the time when it gives the relevant Reference Notice to the Director
(in the case of a reference under paragraph 13 falling within sub-paragraph
13.4(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 14 (in the case of such a notice, including the case of a reference under
paragraph 13 falling within sub-paragraph 13.4(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.
	 
	17.2	 	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 14.
	 
	17.3	 	Any Information furnished to the Director under this paragraph 17 or under paragraph 7 or 8
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”).
	 
	17.4	 	The Appointee shall enter into a written contract of engagement with the Reporter which
shall:

B34

 

	 	(1)	 	where such a report is required by the Director under sub-paragraph 17.3,
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.
	 
	17.5	 	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 any Relevant 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)	 	to inspect and make photocopies of, and take extracts from, any
books and records of the Appointee maintained in relation to the Appointed
Business;
	 
	 	(b)	 	to carry out inspections, measurements and tests on or in
relation to any such premises or Relevant Plant; and
	 
	 	(c)	 	to take on to such premises or on to or in to any Relevant
Plant such other persons and such equipment as may be necessary for the
purposes of preparing and completing his report.

	17.6	 	Nothing in sub-paragraph 17.5 shall require the Appointee:

	 	(1)	 	to do anything which is outside its reasonable control; or
	 
	 	(2)	 	to do, or to allow the Reporter to do, anything which would materially
disrupt the Appointee’s business (unless it is essential that that thing be done to
enable the Reporter to prepare his report).

B35

 

	17.7	 	In sub-paragraphs 17.4 and 17.5:

	 	(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 and
other pipes and their accessories.

B36

 

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 Act (section 46(2)&(3) of the 1991 Act); 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;

C37

 

	 	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 -
	 
	 	 	 	Water Infrastructure Charge £200

Sewerage Infrastructure Charge £200

	2.2	 	In respect of each Charging Year starting on or after 1st April 1996 -

	 	2.2.1the 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;

	 
	 	 	 	(For information only: both water and sewerage infrastructure charge was
restated by Periodic Review 1999 as £229.23 for the Charging Year starting
on 1 April 2000)

	 	 	 	and

	 	2.2.2	 	sub-paragraph 4/5.2 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

C38

 

	 	 	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)	 	the aggregate of the Relevant Multipliers for all those premises less
	 
	 	(2)	 	the maximum number of premises with water or, as the case may be,
sewerage connections on the site at any time in the period of 5 years before the
development or redevelopment began.

	5.2	 	For the purpose of calculating the amount of the limit imposed by this paragraph -

	 	(a)	 	each premises to which sub-paragraph 2.1.3 applies shall be deemed to have a
Relevant Multiplier of 1; and
	 
	 	(b)	 	where, by virtue of paragraph 3 or 4 of this Condition, the Appointee would be
permitted to charge more in respect of any premises resulting from the development or
redevelopment than the level otherwise applying under paragraph 2, the limit shall be
increased by the amount of the excess.

	6.1	 	Subject to sub-paragraph 6.2, where -

	 	(a)	 	a person who has received a demand, or undertaken, to pay Infrastructure
Charges in respect of 2 or more Houses subject to a Common Billing Agreement fails to
pay them, or any part of them, within 14 days of the date of connection; or
	 
	 	(b)	 	a Common Billing Agreement is terminated otherwise than in accordance with its
terms by the person who has undertaken to pay charges under it,

	 	 	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 Instalment 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 if
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.

C39

 

	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(es) 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 premises.
	 
	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 connection or both, refer to the Director, for determination by him, 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, or as the
case may be, sewerage connections made by the Appointee bears the same proportion to
its aggregate revenue from Water 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

C40

 

	 	 	 	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 to any difference in those proportions in
respect of that year.

	12.2	 	In sub-paragraph 12.1 “the Subsequent Period” means the period from 1st April immediately
following the Charging Year in which the reference is made until 31st March 1995 (or, if there
is no Periodic 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(1) 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(1) to sub-paragraphl7/3 of that Condition shall be taken as a
reference to this sub-paragraph.

C41

 

14. References to the Competition Commission

Where -

	 	(1)	 	following the giving of notice under sub-paragraph 11.1 or 11.2, the
Director has not notified the Appointee of his determination within 1 year from the
Review Notice Date; or
	 
	 	(2)	 	following the giving of notice under sub-paragraph 12.1 or 12.3, the
Director has not notified the Appointee of his determination within 1 month from the
date on which the notice under that sub-paragraph is given; or
	 
	 	(3)	 	the Appointee disputes any determination made by the Director under this
Condition

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

	 	(a)	 	13 months from the Review Notice Date (in the cases referred to in (1) above);
or
	 
	 	(b)	 	2 months from the date on which the notice under sub-paragraph 12.1 or 12.3 is
given (in the cases referred to in (2) above); or
	 
	 	(c)	 	2 months from the date on which the Director gives notice of his determination
to the Appointee (in the cases referred to in (3) above)

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

	(i)	 	in any case referred to in (1) or (2) above, the relevant question; or
	 
	(ii)	 	in the case referred to in (3) above, the disputed determination.
	 
	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.

C42

 

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	 	ascertain in respect of all the Houses subject to the Common Billing Agreement
in question (eg all the flats in a block to which such an agreement applies) and all
communal facilities shared by all or any of them, the total number of water fittings in
all the categories specified in column 1 of the table below;
	 
	 	1.2	 	calculate by reference column 2 of the Table the aggregate loading units
attributable to that total number of water fittings (and increase the aggregate, where
necessary, to take account of the minimum for domestic appliances);
	 
	 	1.3	 	divide that number of loading units by 24 and divide the resulting figure by
the number of Houses subject to the Common Billing Agreement;
	 
	 	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; divide
the aggregate loading units by 24; and the resulting number will be the Relevant Multiplier,
provided that if the resulting number is less than 1, the Relevant Multiplier will be 1.

 

 

TABLE

	 	 	 	 	 
	Column 1	 	Column 2	 
	Water Fitting (note 1)	 	Loading Units	 
	 
	WC flushing cistern
	 	 	2	 
	Wash basin in a House
	 	 	1.5	 
	Wash basin elsewhere
	 	 	3	 
	Bath (tap nominal size 3/4 in/20 mm) (note 2)
	 	 	10	 
	Bath (tap nominal size larger than 3A in/20 mm (note 2)
	 	 	22	 
	Shower
	 	 	3	 
	Sink (tap nominal size 1/2 in/15 mm)
	 	 	3	 
	Sink (tap nominal size larger than % in/15 mm)
	 	 	5	 
	Spray tap
	 	 	0.5	 
	Bidet
	 	 	1.5	 
	Domestic
appliance (subject to a minimum of 6 L.U.s per House — (notes 3 & 4)
	 	 	3	 
	Communal or commercial appliance (note 3)
	 	 	10	 
	Any other water fitting or outlet (including a tap but excluding a urine or water softener)
	 	 	3	 

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 that fitting;
	 
	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 House and “communal or commercial appliance” means an appliance (including
a dishwasher, a washing machine and a waste disposal 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 domestic appliances (whether or not the House has any such
appliances) except, in the case of any House, where neither a washing machine nor a dishwasher
can be provided (and there is no plumbing, outlet, dedicated space or planning or other
provision for 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.

F44

 

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 could levy 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 expenditure costs incurred by undertakers in extending the network of reservoirs,
mains, sewers and treatment works, and developing other 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 sewerage connection. It also contains provisions for
adjusting charges. The Condition is structured as follows:

	 	 	 	Paragraph 1 deals with matters of interpretation and contains definitions of terms
used in this Condition. (Definitions of terms common to all Conditions are included
in Condition A);

	 	-	 	Paragraphs 2 to 8 deal with the level of infrastructure charges, and paragraphs
11, 12 and 14 contain general provisions for reviewing the levels of charge;
	 
	 	-	 	Paragraphs 9 and 13 are concerned with the provision of information;
	 
	 	-	 	Paragraph 10 provides for arbitration in specified circumstances.
	 
	 	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.

F45

 

	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.

F46

 

Condition D: Charges Schemes

	1.	 	In this Condition:

“the Instalment 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 payable for the relevant connection had been
borrowed by the Appointee on terms:

	 	(1)	 	requiring interest to be paid and capital to be repaid in twelve equal
annual instalments; and
	 
	 	(2)	 	providing for the amount of the interest to be calculated at such rate,
and in accordance with such other provision, as may have been determined either by
the Appointee with the approval of the Director or, in default of such a
determination, by the Director.

	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 (section 143 of 1991 Act), by which:

	 	(1)	 	it fixes the charges to be paid for supplies of water for domestic
purposes except where such charges are determined by or in accordance with such an
agreement as is referred to in section 75 (section 142 of 1991 Act); and
	 
	 	(2)	 	it fixes the charges to be paid for such connections as are described in
section 79(2)(a) (section 143 of 1991 Act).

	2.2	 	The relevant date for the purpose of sub-paragraph 2.1(1) is the transfer date
and for the purpose of sub-paragraph 2.1(2) is 1st April 1990.
	 
	 	3.	For the purposes of paragraph 2 so much of any such charges scheme made by the
Appointee 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 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).
	 
	 	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
to a building or part of a building which is occupied as a dwelling house immediately
before the connection is made:

	 	(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 charges are payable is made; or, at the option of the person liable to
pay the relevant charges,

F47

 

	 	(2)	 	an amount equal to the Instalment 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.

	5.	 	The Appointee shall:

	 	(1)	 	inform persons who enquire about charges for such connections as are
described in section 79(2) (section 146 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;
	 
	 	(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
	 
	 	(3)	 	send a copy of any such scheme in its latest form free of charge to any
person requesting it.

	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).

F48

 

Condition E: Prohibition on Undue Discrimination and Undue Preference and Information on charges:

	1.	 	This Condition applies in relation to charges:

	 	(1)	 	fixed by the Appointee under any such charges scheme as is referred to in
section 76 (section 143 of 1991 Act) by which the Appointee fixes the charges to be
paid for any water supply services provided by the Appointee in the course of
carrying out its functions;
	 
	 	(2)	 	for any water supply services provided by the Appointee in the course of
carrying out its functions payable under any such agreement as is referred to in
section 75 (section 142 of 1991 Act) which are in accordance with standard charges
published or fixed by the Appointee;
	 
	 	(3)	 	determined by agreement in respect of a supply of water for non-domestic
purposes which are in accordance with standard charges published or fixed by the
Appointee;
	 
	 	(4)	 	for any water supply services provided by the Appointee fixed under any
such charges scheme made by the Appointee 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;
	 
	 	(5)	 	for any water supply services provided by the Appointee in the course of
carrying out its 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;
	 
	 	(6)	 	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.

	 	 	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.

	2.	 	It shall be the duty of the Appointee in fixing or agreeing charges falling within any of
sub-paragraphs 1(1) to 1(4) inclusive to ensure that no undue preference is shown to, and that
there is no undue discrimination against, any class of customers or potential customers.

	3.	 	It shall be the duty of the Appointee in fixing or agreeing charges falling within either
sub-paragraph 1(5) or 1(6) 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 it
prior to the transfer date.

F49

 

	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.
	 
	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 or service made or provided under any
such agreement as is referred to in sub-paragraphs 1(5) and 1(6) and the terms and conditions
on which that supply or service is made or provided.
	 
	6.	 	This Condition shall not apply:

	 	(1)	 	to any such metering trials scheme as was made by the Appointee in
accordance with section 4 of the Public Utility Transfers and Water Charges Act 1988
before the transfer date and which:

	 	(a)	 	was either in force immediately before the transfer date or is
due to come into force after the transfer date; and
	 
	 	(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);

	 	(2)	 	to so much of 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);
	 
	 	(3)	 	so as to require the Appointee to contravene any local statutory
provision;
	 
	 	(4)	 	to 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 or so as to require the Appointee to have regard to any such terms or
conditions;
	 
	 	(5)	 	to any Water 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 Condition C; or
	 
	 	(6)	 	to any terms and conditions on which any supply of water in bulk is given
by the Appointee to another water undertaker.

	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:

	 	(1)	 	any charges scheme made by the Appointee under section 31 of the 1973 Act
has effect on and after the transfer date by virtue of paragraph 16(1) of

F50

 

	 	 	 	Schedule 26 as if it were a charges scheme made under section 76 (section 143 of
1991 Act)-by the Appointee; or
	 
	 	(2)	 	any agreement made or entered into by the Appointee prior to the transfer
date continues in force after the transfer date.

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Condition F: Accounts and accounting information (modified on 3 March 1993 and coming into effect
03/03/1993)) and 8 May 1997 para 9.3 and 1.4.00 paral.4A)

	1.1	 	Introduction

The purposes of this Condition are to ensure that:

	 	(1)	 	the financial affairs of the Appointed Business can be assessed and
reported on separately from other businesses and activities of the Appointee, as if
its sole business consisted of being a water undertaker having its equity share
capital listed on the International Stock Exchange of United Kingdom and Republic of
Ireland Ltd;
	 
	 	(2)	 	information on revenues, costs, assets and liabilities attributable to
specified activities of the Appointed Business can be provided and reported on;
	 
	 	(3)	 	transactions between the Appointed Business and any other business or
activity of the Appointee or any Associated Company can be assessed and reported on;
	 
	 	(4)	 	there is no cross-subsidy between the Appointed Business and any other
business of the Appointee or between Appointed Business and any Associated Company;
	 
	 	(4A)	 	 The transfer of 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 undertaker or to finance those activities
	 
	 	(5)	 	the Director is furnished with regular accounting and other information
to enable him to compare the financial position and performance (including, without
limitation, costs) of the Appointed Business and of so much of the respective
businesses and activities of all other undertakers holding appointments made under
Chapter I of Part II of the Act as consists of the carrying out of the Regulated
Activities; and
	 
	 	(6)	 	the Appointee has at its disposal sufficient financial and managerial
resources to carry out the Regulated Activities (including any investment programme
necessary to fulfil its obligation under the Appointment(s)).

	2.	 	Interpretation and Construction
	 
	2.1	 	In this Condition and for the purposes of this Condition:
	 
	 	 	references to “the Appointed Business” shall be construed as if the
Appointed Business included the management and holding by the 

        Appointee of any protected land for so long as it is not transferred under
paragraph 7 of Condition K
	 
	 	 	 “infrastructure assets” means

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	 	(1)	 	Network Assets, as defined in paragraph 1 of Condition L; and
	 
	 	(2)	 	all of the following:

	 	(a)	 	valves and hydrants forming part of the water and trunk main
systems;
	 
	 	(b)	 	impounding and pumped raw water storage reservoirs;
	 
	 	(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;

   
“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;

     “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.

	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.
	 
	2.3	 	For the purposes of this Condition:

	 	(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

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	 	(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.

	3.	 	Accounting Records
	 
	 	 	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.
	 
	4.	 	Accounting Statements
	 
	4.1	 	The Appointee 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:

	 	(1)	 	the Appointed Business;
	 
	 	(2)	 	on an aggregated basis, all businesses and activities of the Appointee
other than the Appointed Business; and
	 
	 	(3)	 	on an aggregated basis, all businesses and activities of the Appointee
including the Appointed Business

	 	 	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.

	4.2	 	Accounting statements prepared under sub-paragraph 4.1 shall:

	 	(1)	 	so far as reasonably practicable having regard to the purposes of this
Condition, have the same content as the annual accounts of the Appointee prepared
under the 1985 Act and be prepared in accordance with the formats and the accounting
policies and principles which apply to those accounts; and
	 
	 	(2)	 	state the principal accounting policies applied.

	5.	 	Segmental Information
	 
	5.1	 	Accounting statements prepared under paragraph 4 shall show or disclose separately:

	 	(1)	 	an analysis of total operating costs (excluding interest and taxation) of
the Appointed Business showing separately for each Principal Service:

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	 	(a)	 	manpower costs
	 
	 	(b)	 	other costs of employment
	 
	 	(c)	 	power
	 
	 	(d)	 	local authority rates
	 
	 	(e)	 	water charges (including abstraction charges and amounts
payable for taking supplies of water in bulk)
	 
	 	(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;

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	 	 	(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)	 	the details reasonably necessary to reconcile the tangible fixed assets shown
in it with the tangible fixed assets shown in the analysis prepared under this
sub-paragraph in respect of the immediately preceding financial year (including details
of grants);
	 
	 	(ii)	 	a statement of any assets which have been re-classified as current assets
during the relevant financial year; and
	 
	 	(iii)	 	to the extent that information is required to be given in respect of any of
the items included in the annual accounts of the Appointee prepared under the 1985 Act
referred to in this sub-paragraph 5.1(3) by virtue of Part Ill of Schedule 4 to the
1985 Act, the same information in respect of those items. In the case of the first
analysis prepared under this sub-paragraph the reconciliation required to be included
under (i) above shall be with the analysis prepared by the Water Authority in respect
of the financial year ended last before the transfer date; and
	 
	 	(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

F56

 

	 	 	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 1(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(1)
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-paragraph 6.7, if the amount to be disclosed under sub-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 £100,000, whichever is the greater, then that
transaction shall not be aggregated under sub-paragraph 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.

F57

 

	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)	The book value of the asset or liability the subject of, or affected by,
the transaction; and
	 
	 	 	(2)	The consideration or other charge given, paid or waived.

	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 any Associated
Company in respect of the services rendered to the Appointee by that company, which exceeds -

	 	(i)	 	such prices in respect of the service in question which the
Appointee has ascertained by market testing in accordance with such
arrangements as the Director may have approved for the purpose of this
paragraph and as set out in Regulatory Accounting Guideline 5 (Transfer Pricing
in the Water and Sewerage Industry) or any revision or modification of it for
the time being in force, provided that those arrangements have no prejudicial
effect upon the proper carrying out of the Appointee’s functions or any of
them; or
	 
	 	(ii)	 	if, in the opinion of the Director, the Appointee has
demonstrated that market testing as described in (i) above is inappropriate,
such proportion as the Director may agree of the Associated Company’s costs in
providing to the Appointee the service in question (including a reasonable
return to the Associated Company)

	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.

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	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) The Appointee shall not, without the consent of the Director

	 	(i)	 	give any guarantee of any liability of any Associated Company;
or
	 
	 	(ii)	 	make to any such company any loan.

6.11(1A) The Appointee shall not, without the consent of the Director,

	 	(i)	 	enter into an agreement or incur an commitment incorporating a
cross-default obligation, or
	 
	 	(ii)	 	subject to sub-paragraph (1 B) below, continue or permit to
remain in effect any agreement or commitment incorporating a cross-default
obligation.

6.11(1B) Where liability under the cross-default obligation would arise only on a default by a
subsidiary company of the Appointee, the Appointee may permit that cross-default obligation to
remain in effect for the period for which it was fixed by the instrument which created it, so long
as its potential liability is not increased and no changes are made in the terms under which that
liability might arise.

6.11(2) For the purposes of this paragraph 6.11

(a) “liability” includes the creation of any mortgage, charge, pledge, lien or other form of
security or encumbrance, the making of any loan and the undertaking of any other
indebtedness;

(b) “loan” includes the transfer or lending, by any means, of any sum of money or of any
rights in respect of that sum; and

(c) “cross-default obligation” means a term of any agreement or arrangement whereby the
Appointee’s liability to pay or repay any debt or other sum arises or is increased or
accelerated by reason of a default of any person other than the Appointee.

6.12 Without prejudice to the application of paragraph 6.2 the Appointee shall declare or pay
dividends only in accordance with a dividend policy which, has been approved by the Board of the
Appointee and which complies with the following principles —

	 	(i)	 	the dividends declared or paid will not impair the ability of
the Appointee to finance the Appointed Business; and

F59

 

under a system of incentive regulation dividends would be expected to reward efficiency and the
management of economic risk .

Financial
Ring-Fencing

	 	 	6A.1 The Appointee shall at all times act in the manner best calculated to
ensure that it has adequate:

	 	(a)	 	financial resources and facilities; and
	 
	 	(b)	 	management resources
	 
	 	to enable it to carry out the Regulated Activities (including the investment programme
necessary to fulfil its obligations under the Appointment(s)).

	 	 	6A.2A The Appointee shall, at the same time as it complies with sub-paragraph 9.3 (submission of
accounting statements) submit to the Director a Certificate in the following terms:

	 	(1)	 	that in the opinion of the Directors the Appointee will have available to
it sufficient financial resources and facilities to enable it to carry out, for at
least the next 12 months, the Regulated Activities (including the investment
programme necessary to fulfil the Appointee’s obligations under the Appointment(s));
	 
	 	 	 	and
	 
	 	(2)	 	that in the opinion of the Directors the Appointee will, for at least the
next 12 months, have available to it management resources which are sufficient to
enable it to carry out those functions.
	 
	 	(3)	 	that in the opinion of the directors, all contracts entered into with any
Associated Company include all necessary provisions and requirements concerning the
standard of service to be supplied to the Appointee, to ensure that it is able to
meet all its obligations as a water undertaker.

6A.2B(1) The Appointee shall, when it complies with paragraph 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.

6A3 (1) Whenever the directors become aware that the Appointee or any Group Company is proposing
to embark upon any activity which is not one of those described in sub-paragraph 6A.1 and which may
be material in relation to the Appointee’s ability to finance the carrying out

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of the functions mentioned in that sub-paragraph, they shall as soon as is practicable, having
regard to the purposes of this Condition, notify the Director about that proposal.

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 sub-paragraph 6A3 (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 and 6A2B 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 sub 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 inconsistencies 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.5A 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 the 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 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 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 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:

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	 	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;
	 
	 	 	(f)  the dividend policy adopted by the Appointee and the implications of paragraph
6.12 of this condition F; and
	 
	 	 	(g)  the Principles of Good Governance and Code of Best Practice (or any successor
document having a similar purposes and content) as 
       may from time to time be
incorporated into or approved for the purposes of the Listing Rules of the London Stock
Exchange.

6A.5B The Appointee shall, at such times and in such ways as may from time to time be required by
the Listing Rules of the London Stock Exchange, publish such Information about its annual final
results as is by those rules required to be announced by a company whose shares are for the time
being listed on the London Stock Exchange.

	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 1(5)

F62

 

	 	 	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 H 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)	 	specify the form and content of current cost accounting statements,
including information on specified types of revenue, cost, asset or liability and
information on the revenues, costs, assets and liabilities attributable to specified
activities, provided that the guidelines may not require the Appointee to disclose
information in such current cost accounting statements in respect of items in
respect of which the Appointee is not required to give information in accounting
statements prepared under paragraph 4 from time to time;
	 
	 	(2)	 	require any reconciliation that may be required with the annual accounts
of the Appointee prepared under the 1985 Act;
	 
	 	(3)	 	specify the accounting principles and the bases of valuation to be used
in preparing current cost accounting statements; and
	 
	 	(4)	 	specify the nature of the report by the Auditors required to be given in
respect of accounting statements.

	9.	 	Audit and publication of Accounting Statements
	 
	9.1	 	The Appointee shall procure the following reports by the Auditors addressed to the Director:

	 	(1)	 	in respect of each set of accounting statements prepared under this
Condition, a report stating whether in their opinion:

	 	(a)	 	proper accounting records have been kept by the Appointee as
required by paragraph 3; and
	 
	 	(b)	 	that set of accounting statements (including the information
required to be shown or disclosed under paragraphs 5, 6 and 7) is in agreement
with the Appointee’s accounting records and complies with the relevant
paragraphs

F63

 

	 	 	 	(including any relevant guidelines) or, in the case of accounting statements
prepared under paragraph 8, complies with the relevant guidelines;

	 	(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 sub-paragraph 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 Competition 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 Competition 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 Competition 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 Competition Commission determines that they
shall apply.

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APPENDIX

	 	 	 	 	 	 	 	 	 
	COLUMN 1	 	 	 	 	 	COLUMN 2
	1.

(a)

	 	Any borrowings or sums lent:

by or to the Appointed Business to or
by any other business or activity of the
Appointee; or
	 	 	1.	 	 	The principal of the
amount borrowed or lent,
the date on which or the
dates between which repayment
is to be made and the rate of interest payable.
	(b)

	 	by or to the Appointee to or by any
Associated Company.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	1A

	 	Any dividend paid to any Associated
Company
	 	 	1A	 	 	The basis on which the dividend has been established
	 
	 	 	 	 	 	 	 	 
	2.

	 	The giving of any guarantee or any other
form of security by the Appointee for or in
respect of any obligations of any Associated
Company.
	 	 	2.	 	 	The form of the guarantee or other
security given, the assets, the subject of
the security, the amount of the obligation
(including where relevant
the rate of interest
payable) and the date of
maturity of the
obligation.
	 
	 	 	 	 	 	 	 	 
	3.
(a)
(b)

	 	The transfer of any asset or liability:

to or by the Appointee by or to an
Associated Company; or 

to or by the Appointed Business by or to
any other business or activity of the
Appointee.
	 	 	3.	 	 	The asset or liability
the subject of the
transfer, the amount of
the consideration for the
transfer and the value
attributed to the asset
or liability in the
accounting records kept
by the Appointee.
	 
	 	 	 	 	 	 	 	 
	4.

	 	The supply of any service by or to the
Appointee to or by an Associated Company or by
or to the Appointed Business to or by any
other business or activity of the Appointee.
	 	 	4.	 	 	The nature of the
service supplied, the
terms on which it was
supplied and the total
charge made for the
service.
	 
	 	 	 	 	 	 	 	 
	5.

	 	The omission by the Appointee or any
Associated Company to exercise a right as a
result of which the value* of the aggregate
assets less the aggregate liabilities (“net
assets”) of the Appointee is decreased.
	 	 	5.	 	 	 The company omitting
to exercise the right and
the amount by which the
value* of the net assets
of the Appointee is
decreased.
	 
	 	 	 	 	 	 	 	 
	6.

	 	The waiver by the Appointee or the
Appointed Business of any consideration,
remuneration or other payment owed to it by
any Associated Company or other business or
activity of the Appointee.
	 	 	6.	 	 	 The amount or the
consideration,
remuneration of payment
waived.

 

			
	*	 	For this purpose the value shall be taken to be the value attributed to the relevant items in the
accounting records kept by the Appointee or, in case of an interest in land or buildings which is effected by the omission, the open market value of that interest or, where under Condition K a
Certificate as to the best price of that interest has been furnished to the Director, that best
price

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	Condition G:	 	Code of Practice for Customers and relations with the Customer Service
Committee

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

	 	(1)	 	describing the nature of the services to domestic customers provided by
the Appointee in the course of the Appointed Business;
	 
	 	(2)	 	describing the tariffs charged to domestic customers and such other terms
on which those services are provided as the Appointee considers appropriate for
inclusion;
	 
	 	(3)	 	describing arrangements for the payment of bills by domestic customers
including information about payment by instalments and budget plans;
	 
	 	(4)	 	describing the procedure for handling complaints from domestic customers
established by the Appointee under paragraph 7;
	 
	 	(5)	 	setting out information as to the availability of, facilities for, and
any amount payable in respect of, the testing of meters and describing the method of
proof and effect of a meter reading, liability for charges after ceasing to occupy
metered premises and the offences referred to in paragraph 3 of Schedule 10
(Offences of tampering with meters etc.) (section 162(3) of the 1991 Act);
	 
	 	(6)	 	informing customers what they should do in cases of emergency and when
making enquiries of the Appointee; and
	 
	 	(7)	 	describing the functions of the Customer Service Committee under the Act
and informing customers where they can contact the Customer Service Committee.

	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 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.

F66

 

	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, under 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)	 	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)	 	draw the attention of domestic customers to the existence of the Code and
each substantive revision of it and how they may inspect or obtain a copy of the
Code in its latest form;
	 
	 	(3)	 	make a copy of the Code in its latest form available for inspection at
each relevant Premises;
	 
	 	(4)	 	send a copy of the Code in its latest form free of charge to any person
requesting it; and
	 
	 	(5)	 	provide the information referred to in sub-paragraph (5) of paragraph 1
with every demand for payment of charges which are fixed by reference to metered
volume.

	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.

G67

 

	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.

G68

 

Condition H : Code of Practice and Procedure on Debt Recovery

	1.	 	Unless it has already done so, the Appointee shall within two months after 1 April 2005
prepare and submit to the Director for his approval a Code of Practice which shall:

	 	(1)	 	give guidance to domestic customers who have difficulty in paying their
bills;
	 
	 	(2)	 	describe the range of procedures which may be adopted by the Appointee to
collect outstanding debt from domestic customers; and
	 
	 	(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 1(1) and 1(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:

G69

 

	 	(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
	 
	 	(4)	 	send a copy of the Code in its latest form free of charge to any person
requesting it.

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Condition I : Code of Practice and Procedure on Leakage

	1.	 	In this Condition “supply pipe” means that part of the service pipe for which the owner is
responsible.

	2.	 	The Appointee shall within two months after the transfer date prepare and submit to the
Director for his approval a Code of Practice concerning liability for charges of domestic
customers occupying metered premises where there is an unidentified leak on the supply pipe.
The Code shall contain information as to the procedures described in paragraph 8 and such
other information as the Appointee considers appropriate.

	3.	 	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 the manner of its operation.

	4.	 	In carrying out any review of, or making any substantive revision of, the Code or its
operation (whether under paragraph 3 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.

	5.	 	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 4, it wishes to
make.

	6.	 	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 of the
date on which the Code or, as the case may be, the relevant revision is submitted to him under
paragraph 2 or, as the case may be, under paragraph 5 as a condition of approving the Code
under paragraph 2 or, as the case may be, approving any revision of the Code under paragraph
5, being such modifications as in the Director’s opinion are necessary to ensure that the Code
contains the information required by paragraph 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.

	7	 	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 which are fixed by reference to
volume, 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

I71

 

	 	(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 as soon as reasonably practicable inform any
sewerage undertaker who provides sewerage services in relation to the same premises of that
fact and of the basis on which the adjustment has been, or will be, made.

I72

 

Condition J: Levels of Service Information and Service Targets

Part I. Levels of Service Information

	1.	 	Provision of Information

	1.1	 	The Appointee shall in respect of each Charging Year, starting with the Charging Year
commencing on 1st April 1990, furnish Information to the Director once in each Charging Year
in respect of the matters specified in, and otherwise in accordance with, Appendix A to the
letter entitled “Levels of Service” dated [see Note below] from the Secretary of State to the
Water Authority (“the Levels of Service Letter”).

	1.2	 	Where the Director is satisfied that the provision of Information in respect of the matters
specified in Appendix A to the Levels of Service Letter is inadequate to enable him properly
to keep the quality of the services provided by the Appointee in the course of the Appointed
Business (“Services”) under review the Director may, subject to prior consultation with the
Appointee, by notice to the Appointee vary the matters specified in that Appendix in respect
of which Information is to be furnished under sub-paragraph 1.1 in a manner which is
reasonable having regard to the Director’s duties under sub-sections (1) and (2) of section 26
(section 27 of the 1991 Act) and thereafter the Appointee shall in respect of each Charging
Year furnish Information to the Director in respect of those matters as so varied. The
Director may, subject as aforesaid, make variations from time to time under this sub-paragraph
and references in this sub-paragraph to the matters specified in Appendix A to the Levels of
Service Letter shall be read and construed as though they were references to the matters
specified in Appendix A as varied from time to time.

	1.3	 	Where 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) (and, if so, what provisions should be set out in the application) or to require the
Appointee to notify a Service Target under sub-paragraph 3.2 the Appointee shall furnish to
the Director:

	 	(1)	 	such further Information as the Director reasonably requires in respect
of the quality of Service; and
	 
	 	(2)	 	Information in respect of the quality of Services in respect of any
reasonable period other than a Charging Year and/or more frequently than once in a
Charging Year (but not more frequently than is reasonable) as may be specified by
the Director. Such Information, at the Appointee’s option, may consist of updating
Information previously furnished to the Director under sub-paragraph 1.1, 1.2 or
1.3(1).

	1.4	 	In this Condition references to the quality of Services shall include references to the
manner in which the Appointee carries out the Regulated Activities.

J73

 

	2.	 	Reports, Certificates etc

Information furnished to the Director by the Appointee under paragraph 1 (other than under
sub-paragraph 1.3) and, where the Director so requires, Information furnished to him by the
Appointee under that sub-paragraph, (“Levels of Service Information”) shall be accompanied by:

	 	(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.

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	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)	 	all such Information as in the opinion of the Appointee is necessary to
provide a proper explanation of the Report and of the quality of Services as
compared with any relevant Service Target;
	 
	 	(2)	 	a statement of the methods used by the Appointee to keep the quality of
Services under review in accordance with paragraph 4 and the steps taken by it to
monitor and assess the quality of Services in accordance with that paragraph; and

	5.3	 	Without prejudice to the generality of sub-paragraph 5.2, a Service Target Report may include
a statement of:

	 	(1)	 	any matters which, in the opinion of the Appointee, will or may result in
the Appointee being unable to achieve any Service Target or which have resulted in
the Appointee being unable to achieve any Service Target to the extent that it was
expressed in the notification to the Director under paragraph 4 to be a target for
achievement during the relevant Charging Year or by a date or at a time during that
Charging Year;
	 
	 	(2)	 	any matters which have made it impossible for the Appointee to ascertain,
either at all or with reasonable accuracy, whether or not any Service Target has
been, or is likely to be, achieved; and
	 
	 	(3)	 	any exceptional matters or matters out of the ordinary course and in each
case outside the reasonable control of the Appointee which have affected the quality
of any Services and which could fairly be said to render or to have rendered the
achievement of any Service Target substantially more onerous.

	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

J75

 

	 	 	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) (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) (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)	 	the respective measures required to be taken to achieve any Service
Target and the respective costs of such measures (and, where more than one measure
is available, whether or not subject to the expenditure of money, the Appointee
shall give details of the alternative measures); and
	 
	 	(2)	 	the measures being taken or proposed to be taken to achieve any Service
Target.

	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

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	 	 	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)	 	the accuracy and sufficiency of any Information furnished by the
Appointee to the Director under this Condition;
	 
	 	(2)	 	the methods used and steps taken by the Appointee to ascertain any such
Information; and
	 
	 	(3)	 	whether any Service Target has been achieved

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).

	9.	 	Such co-operation shall include, without limitation:

	 	(1)	 	subject to reasonable prior notice to the Appointee, giving to the
Director access at reasonable hours to any Relevant Plant and to any premises
occupied by the Appointee in relation to carrying out the Regulated Activities; and
	 
	 	(2)	 	subject to reasonable prior notice to the Appointee, allowing the
Director at reasonable hours:

	 	(a)	 	to inspect and make photocopies of, and take extracts from, any
books and records of the Appointee maintained in relation to the Appointed
Business;
	 
	 	(b)	 	to carry out inspections, measurements and tests on or in
relation to any such premises or Relevant Plant; and
	 
	 	(c)	 	to take on to or in to any such premises or Relevant Plant such
other persons and such equipment as may be necessary for the purpose of such
investigation.

	10.	 	Nothing in paragraphs 8 and 9 shall require the Appointee:
	 
	 	 	(1) to do anything which is outside its reasonable control; or
	 
	 	 	(2) to do, or to allow the Director to do, anything which would materially
disrupt the Appointee’s business (unless it is essential for the 

      purposes of the investigation that that thing be done).

	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 wilful default.

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	12.	 	In paragraphs 9, 10 and 11:

	 	(1)	 	references to the Director include references to his employees and
agents: and
	 
	 	(2)	 	“Relevant Plant” means any plant used by the Appointee for the purpose of
the Appointed Business including, without limitation, water mains, sewers and other
pipes and their accessories.

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.

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Condition K: “Ring Fencing”, and Disposals of Land

(made on 27/0311996- effective 01/04/1996)

	1.	 	Introduction
	 
	 	 	The purposes of this Condition are to ensure:

	 	(1)	 	that the Appointee retains sufficient rights and assets for the purpose
described in sub-paragraph 3.1; and
	 
	 	(2)	 	that the best price is received from disposals of land to which this
Condition applies so as to secure benefits to customers through the application of
the proceeds of such disposals to reduce charges as provided in, and subject to the
provisions of, Condition B.

	2.	 	Interpretation and Construction
	 
	2.1	 	In this Condition and for the purposes of this Condition:

a “Disposal Certificate” means a certificate signed by all the directors of the
Appointee for the time being or approved by a duly convened meeting of the board of
directors of the Appointee for the time being and signed by a director or the secretary
of the Appointee confirming that it has been so approved and having attached to it a
certified copy of an extract of the minutes of the relevant meeting containing the
resolution to approve the certificate;

“formal tender” means a tender, acceptance of which creates a binding obligation to purchase;

“land” includes any interest or right in or over any land;

“the Materiality Amount” for the purpose of any disposal of land

is £1 million

or such greater amount as may from time to time be determined by the Director so as to allow
for movements in the Retail Prices Index or as may from time to time otherwise be determined
by the Director and approved by the Secretary of State;

“nominee” of any person includes any person acting at the direction of, or in concert with, that
first-mentioned person or pursuant to any

     agreement or understanding with that first mentioned person;

  a “proposed disposal” is any such disposal to which paragraphs
4, 5 or 6 applies;

“protected land” and “disposal” have the meanings respectively given to them in section 189
(section 219 of the 1991 Act) and cognate expressions shall be construed accordingly;

“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

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	 	 	 	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

£500,000

or such greater amount as may from time to time be determined by the Director so as to allow
for movements in the Retail Prices Index or as may from time to time otherwise be determined
by the Director and approved by the Secretary of State;

“value” includes value of any kind including, without limitation,
cash, the value of real or personal property or any interest in such
property and 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.

	2.2	 	For the purpose of calculating “best price”:

	 	(1)	 	for the purpose of any Valuer’s certificate required to be furnished
under sub-paragraph 4.6(1)(a)(i), or 5.1(1)(b);

	 	(a)	 	no reduction shall be made on account of the method, terms and
timing of the proposed disposal (if relevant) in respect of which the relevant
certificate is required to be furnished, but “best price” shall be calculated
on the basis of a disposal of the land in question, the method, terms and
timing of which are most likely to secure that the best price is obtained; and
	 
	 	(b)	 	where the proposed disposal or, as the case may be, the change
of use is related to, or connected or interdependent with, any other proposed
disposal, then, subject to sub-paragraph (a), no account shall be taken of that
fact; and

	 	(2)	 	for any purpose under this Condition, “best price” shall include value of
any kind as “value” is defined in sub-paragraph 2.1.

	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.

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	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 3.1are 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)	 	to any Short-term Disposal;
	 
	 	(2)	 	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
	 
	 	(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
	 
	 	 	 	does not exceed the Materiality Amount;

	 	(3)	 	to any such disposal of protected land as is referred to in paragraphs 5
and 6;
	 
	 	(4)	 	to any disposal of any protected land made in accordance with any such
provision as is referred to in section 152(5)(a) (section 156 of the 1991 Act) to
the relevant person referred to in that section; or
	 
	 	(5)	 	to any disposal of any protected land made pursuant to any obligation
entered into by the Water Authority prior to the transfer date.

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	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 or subject to conditions) which requires or might
require it to make the proposed disposal, furnish to the Director a Disposal
Certificate which:

	 	(a)	 	identifies the protected land the subject of the proposed
disposal both by written description and by a plan showing:

	 	(i)	 	such protected land; and
	 
	 	(ii)	 	all other land contiguous or adjacent to such
protected land in or over 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 any interest or right and
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;

	 	(b)	 	describes the interest or right in or over the protected land
to be disposed of;
	 
	 	(c)	 	sets out the terms of the proposed disposal;
	 
	 	(d)	 	describes:

	 	(i)	 	the consideration to be received or expected to
be received; and
	 
	 	(ii)	 	separately, any other value which, in the
reasonable opinion of the Appointee, is to be received or derived, or
expected to be received or derived

	 	 	 	in each case from or in connection with the proposed disposal by the Appointee and
the timing of the receipt or derivation thereof;

	 	(e)	 	sets out details as required by (a) to (d) inclusive above in
respect of any other disposal of protected land 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 with or interdependent
with, the proposed disposal or, if none, a statement to that effect;
	 
	 	(f)	 	confirms that the protected land the subject of the proposed
disposal is, or at the time the Appointee is required to give vacant possession
will be, no longer required for carrying out the Regulated Activities and will
not be so required in the foreseeable future;

K4

 

	 	(g)	 	confirms:

	 	(i)	 	that the proposed disposal is an arms length
transaction;
	 
	 	(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 instalments 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

K5

 

	 	 	circumstances at the time when the certificate is given (including, but without limitation,
any reasonable prospect of planning permissions being obtained).

	4.6	 	Where the Appointee proposes to make any such disposal as is mentioned in sub-paragraph 4.1
and the terms or circumstances of the proposed disposal are such that a Disposal Certificate
giving the full confirmation required by (f) or (g) of sub-paragraph 4.3(1) (including, where
relevant, such a certificate as is referred to in sub-paragraph 4.5) cannot properly be given,
the Appointee shall not enter into any obligation (whether unconditional or subject to
conditions) which requires or might require it to make that proposed disposal unless:

	 	(1)	 	in any case where the full confirmation required by (g) of sub-paragraph
4.3(1) (including, where relevant, such a certificate as is referred to in
sub-paragraph 4.5) cannot properly be given:

	 	(a)	 	either:

	 	(i)	 	not less than 10 working days prior to the
Appointee entering into the relevant obligation, the Appointee has
furnished to the Director a Disposal Certificate as required by
sub-paragraph 4.3 including such of the matters specified in (g) as can
properly be certified and a certificate by a valuer appointed by the
Appointee and approved by the Director for the purpose of this
sub-paragraph (“the Valuer”) addressed to the Director which states:

	 	(A)	 	that in the opinion of the Valuer
the consideration to be received by the Appointee from the
proposed disposal is the best price likely to be obtained from
the 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
	 
	 	(B)	 	the amount of the consideration
to be received or expected to be received by the Appointee from
the proposed disposal, expressed in cash according to when that
consideration is to be, or is expected to be, received; or

	 	(ii)	 	the Director gives his prior written consent to
the proposed disposal, such consent not to be unreasonably withheld or
delayed; and

	 	(b)	 	prior to entering into the relevant obligation, the Appointee
shall have furnished to the Director in writing such further Information
regarding the proposed disposal which the Director may reasonably request; and

	 	(2)	 	in any case where the full confirmation required by (f) of sub-paragraph
4.3(1) cannot properly be given, the prior written consent of the Director to the

K6

 

	 	 	 	proposed disposal has been obtained, such consent not to be unreasonably withheld
or delayed.

	5.	 	Disposals of protected land by auction or formal tender

	5.1	 	Where the Appointee 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:

	 	(1)	 	not less than 10 working days prior to the date of the auction or the
invitation to tender:

	 	(a)	 	furnish to the Director a Disposal Certificate which:

	 	(i)	 	contains the information and confirmations
required to be contained in a Disposal Certificate furnished under
sub-paragraph 4.3(1) under items (a), (b), (c), (e), (f) and (g)(iv) of
that sub-paragraph (but so that for this purpose references in the said
item (e) to items (a) to (d) inclusive shall be taken to be references
to items (a) to (c) inclusive);
	 
	 	(ii)	 	sets out the reserve price (if any); and
	 
	 	(iii)	 	confirms that the auction will be conducted on
the basis that bids will be accepted only on condition that they are
not made by an Associated Company or any nominee of any Associated
Company or, as the case may be, that, it will be a term of the
invitation to tender that it is not capable of acceptance by an
Associated Company or any nominee of any Associated Company;

	 	(b)	 	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 disposal of the protected land by auction or, as the
case may be, formal tender and the timing of the proposed disposal are
respectively the method and timing of disposal most likely to secure that the
best price is obtained for the land in question;

	 	(2)	 	prior to the date of the auction or the invitation to tender, furnish to
the Director in writing such further Information regarding the proposed disposal
which the Director may reasonably request.

	5.2	 	In any case where the full confirmation required by sub-paragraph 5.1(1)(a)(i) or (iii)
cannot properly be given, the Appointee shall not proceed with the proposed disposal without
the prior written consent of the Director.

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	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 any protected 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
	 
	 	(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
	 
	 	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:

	 	(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 Valuer”) addressed to the Director which states:

	 	(A)	 	that in the opinion of the Valuer
the consideration to be received by the Appointee from the
proposed disposal is the best price likely to be obtained from a
disposal of the land in question to an unconnected third party,
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

K8

 

	 	 	 	(B) the amount of the consideration
to be received or expected to be received by the Appointee from
the proposed disposal, expressed in cash according to when that
consideration is to be, or is expected to be, received; and

	 	(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)(c) (section 2 of the 1991 Act).

	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.

	7	 	Disclosure of Information to Valuers
	 
	 	 	The Appointee shall disclose to the Valuer 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 Valuer’s certificate to be given under that
provision and such other Information as the Valuer may reasonably require to enable him to
give his certificate.

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Condition L: Underground Asset Management Plans

	1.	 	Interpretation and Construction
	 
	 	 	In this Condition:
	 
	 	 	“the Appointment Obligations” means the Appointee’s obligations under the Appointment and
for this purpose and for this purpose only the Appointee shall be deemed to be subject to an
obligation under the Appointment to achieve any Service Target or Revised Service Target
notified to the Director by the Appointee under Condition J;

“Network Assets” means

	 	(1)	 	water mains and trunk mains (other than any pumps, valves and hydrants);
	 
	 	(2)	 	resource mains and discharge pipes; and
	 
	 	(3)	 	so much of any service pipe as is vested in the Appointee.

	 	“Network Expenditure” means expenditure in relation to any Network Assets (whether, having
regard to the respective purposes referred to in sub-paragraph 2.1 such expenditure is to be
made or incurred in or in relation to creating, acquiring, renewing, repairing, maintaining
or improving any Network Assets or executing works or procuring the execution of works by
other persons in relation to any Network Assets or otherwise);

	“the Plan Period” means such period as the Appointee shall specify, being a period of not less than
fifteen years commencing on:

	 	(1)	 	in the case of the Underground Asset Management Plan required to be
furnished under sub-paragraph 2.1, 1st April 1990;
	 
	 	(2)	 	in the case of any revised Underground Asset Management Plan required to
be furnished under sub-paragraph 2.4, the date of such revised Underground Asset
Management Plan or, in the case of a revised Underground Asset Management Plan
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 is required 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 “Underground Asset Management Plan”) showing separately:

L10

 

	 	(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 revised Underground Asset Management Plan, as at the
date of that revised Underground Asset Management Plan) are, and will
throughout the Plan Period be, maintained in such a state or condition as is
necessary for the purposes described in sub-paragraph 2.2 (“the Relevant
Purposes”), insofar as Network Assets are necessary for, or relevant to, the
Relevant Purposes; and
	 
	 	(b)	 	that the capacity of the system of water supply comprising
solely those Network Assets (but not including any other part of the
Appointee’s system of water supply) is maintained

	 	and the estimate and other Information shall show expenditure to be capitalised and,
separately, expenditure to be expensed; and
	 
	 	(2)	 	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 purpose of ensuring that, taking into account the expenditure to be made or
incurred for the purposes referred to in sub-paragraph 2.1(1):

	 	(a)	 	the Appointee will at all times and from time to time have
available to it for use all Network Assets (and in such a state or condition)
as are necessary for the Relevant Purposes, in so far as Network Assets are
necessary for, or relevant to, the Relevant Purposes; and
	 
	 	(b)	 	that the capacity of the system of water supply comprising
solely those Network Assets (but not including any other part of the
Appointee’s system of water supply) 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)	 	to enable the Appointee to carry out the Regulated Activities in respect
of the whole of the Area in accordance with the provisions of the Act and of any
other enactment or subordinate legislation relating to the Regulated Activities and
in accordance with any service objectives which the Appointee has set itself in
preparing the Underground Asset Management Plan and to carry out the Regulated
Activities in such manner economically and efficiently; and
	 
	 	(2)	 	to enable the Appointee to perform the Appointment Obligations in respect
of the whole of the Area (or, in the case of a Service Target or a Revised Service
Target which applies only to part of the Area, then in respect of that part)

L11

 

	 	 	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.
	 
	2.3	 	Where the Appointee has specified any such assumptions as are referred to in subparagraph
2.2, the Appointee shall also furnish an estimate and other Information as described in
sub-paragraphs 2.1(1) and (2) on the basis of such other assumptions as to the matters
referred to in sub-paragraph 2.2 as may be specified by the Secretary of State.
	 
	2.4	 	The Appointee shall keep the Underground Asset Management Plan prepared under sub-paragraph
2.1 under review and shall prepare a revised Underground Asset Management Plan in respect of
the Plan Period from time to time and in any 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 Management
Plan. Sub-paragraph 2.3 shall apply to any such revised Underground Asset Management Plan (and
so that for this purpose the reference in that sub-paragraph to the Secretary of State shall
be taken to be a reference to the Director) and references in this Condition to a revised
Underground Asset Management Plan shall include references to any estimate and other
Information which the Appointee is required to furnish under sub-paragraph 2.3 in respect of
that revised Underground Asset Management Plan.
	 
	2.5	 	For the purposes of sub-paragraphs 2.1 and 2.4:

	 	(1)	 	due allowance shall be made for Network Assets ceasing to be required for
the Relevant Purposes during the Plan Period;
	 
	 	(2)	 	the Appointee shall include in any Underground Asset Management Plan
furnished to the Secretary of State under sub-paragraph 2.1 or, as the case may be,
to the Director under sub-paragraph 2.4 a description of any agreement or
arrangement under which the Appointee uses Network Assets which are owned by, or
used in conjunction with, another water undertaker (including, without limitation, a
description of any arrangements, as between the Appointee and the other undertaker,
for the repair, renewal, maintenance and improvement of any such Network Assets) and
an estimate and other Information in respect of any expenditure required to be made
or incurred by the Appointee during the 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 Appointment Obligations which the Appointee knows have
occurred or will occur or which the Appointee reasonably believes will, or are
likely to, occur (including, without limitation, any change in demand for the
provision by the Appointee of any services provided by it in the course of carrying
out the Regulated Activities).

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	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 for the purposes of:

	 	(a)	 	providing Information to the Director in accordance with
Condition B to enable him to carry out Periodic Reviews; and
	 
	 	(b)	 	providing Information to the Director in accordance with
paragraph 17 of Condition B.

	3.2	 	The Appointee shall furnish to the Director a written description of such methods and
procedures. The Appointee shall keep under review and shall revise such methods and procedures
from time to time to the extent necessary having regard to the purposes for which such systems
and procedures are intended to be used, this Condition and Condition 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 and furnish to the Director, and separately to the
Appointee, a written report addressed jointly to the Director and the Appointee:

	 	(a)	 	in the case of an Underground Asset Management Plan, stating
whether, in his opinion, the estimate included in the Underground Asset
Management Plan has been prepared in accordance with the methods and procedures
established and maintained by the Appointee under sub-paragraph 3.1 at the date
at which the revised Underground Asset Management Plan has been prepared and if
the action to be taken as described in the other Information included in the
Underground Asset Management Plan were

L13

 

	 	 	 	taken it would be sufficient for the Relevant Purposes, in so far as Network
Assets are necessary for, or relevant to, the Relevant Purposes, (both on
the basis of any assumptions specified by the Appointee and on the basis of
any assumptions specified by the Director) and, if not, what other action
would need to be taken; and
	 
	 	(b)	 	in the case of a revision of the methods and procedures
referred to in paragraph 3, stating whether, in his opinion, the methods and
procedures (as so revised) are sufficient for the purposes described in
sub-paragraph 3.1 and if not, what changes would need to be made to those
methods and procedures so that they were sufficient for those purposes; and

	 	(2)	 	include a term that the Assessor will provide such further explanation or
clarification of his report as the Director may reasonably require and that where,
by reason of anything in the Assessor’s report, it appears to the Director:

	 	(a)	 	that the state or condition or capacity of Network Assets is
such that they are or may be materially inadequate for the Relevant Purposes,
in so far as Network Assets are necessary for, or relevant to, the Relevant
Purposes, (either on the basis of the assumptions specified by the Appointee or
on the basis of the assumptions specified by the Director, if any); or
	 
	 	(b)	 	that the methods and procedures are insufficient for the
purposes described in sub-paragraph 3.1 and that as a result information as to
the state, condition, capacity or performance of Network Assets is or may be
materially inaccurate or incomplete
	 
	 	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 without limitation, so far as is necessary for that purpose:

	 	(1)	 	subject to reasonable prior notice to the Appointee, giving to the
Assessor access at reasonable hours to any Network Assets used by the Appointee and
to any premises occupied by the Appointee in relation to the carrying out of the
Regulated Activities; and
	 
	 	(2)	 	subject to reasonable prior notice to the Appointee, allowing the
Assessor at reasonable hours:

L14

 

	 	(a)	 	to inspect and make photocopies of, and take extracts from, any
books and records of the Appointee maintained in relation to the carrying out
of the Regulated Activities;
	 
	 	(b)	 	to carry out inspections, measurements and tests on or in
relation to any such premises or Network Assets; and
	 
	 	(c)	 	to take on to such premises or on to or in to any Network
Assets such other persons and such equipment as may be necessary for the
purposes of preparing and completing his report.

	4.4	 	Nothing in sub-paragraph 4.3 shall require the Appointee:

	 	(1)	 	to do anything which is outside its reasonable control; or
	 
	 	(2)	 	to do, or to allow the Assessor to do, anything which would materially
disrupt the Appointee’s business (unless it is essential that that thing be done to
enable the Assessor to prepare his report).

	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 Underground Asset Management Plan and the written description of the Appointee’s relevant
methods and procedures required to be furnished to the Secretary of State by the Appointee
under sub-paragraphs 2.1 and 3.2 shall be so furnished not later that 31st January 1990 and if
accepted by him shall be deemed to satisfy the obligations of the Appointee under those
sub-paragraphs (insofar as sub-paragraph 3.2 requires the Appointee to furnish a written
description 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 be furnished 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 a financial year prepared under paragraph 4 of Condition F, a statement of
the expenditure made or incurred in relation to Network Assets during that financial year,
distinguishing between amounts which have been expensed 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.

L15

 

Condition M: Provision of Information to the Director

	1.	 	Subject to paragraphs 3, 4 and 5 the Appointee shall furnish the Director with such
Information as the Director may reasonably require for the purpose of carrying out any of his
functions under the Act.

	2.	 	Information required to be furnished under this Condition shall be furnished in such form and
manner and at such times and be accompanied or supplemented by such explanations as the
Director may reasonably require.

	3.	 	This Condition shall not require the Appointee to furnish the Director with Information in
respect of any function of the Director under sections 16 (section 14 of the 1991 Act), 26
(section 27 of the 1991 Act) and 34 (section 201 of the 1991 Act) but the Appointee shall, if
requested by the Director, give reasoned comments on the accuracy and text of any information
or advice which the Director proposes to publish pursuant to section 34 (section 201of the
1991 Act) and, subject always to section 174 (section 206 of the 1991 Act), nothing in this
paragraph shall prevent the Director from using or disclosing any Information with which he
has been furnished under this Condition or any other Condition of this Appointment for the
purpose of carrying out his functions under the Act (including, without prejudice to the
generality, under sections 16 (section 14 of the 1991 Act), 26 (section 27 of the 1991 Act)
and 34 (section 201 of the 1991 Act)).

	4.	
Neither this Condition nor any other Condition of this Appointment shall
require the Appointee to furnish any Information for any such purpose as is referred to
in section 33 (section 203 of the 1991 Act), which it could not be compelled to produce
or furnish under that section. 

	5.	 	Neither this Condition nor any other Condition of these Appointments shall require the
Appointee to furnish any Information which it would be entitled to refuse to disclose or
produce on grounds of legal professional privilege in proceedings in the High Court.
	 
	6.	 	Where, under any other Condition of these Appointments, the Appointee is or can be required
to furnish Information to the Director there shall be a presumption that the furnishing of
that Information in accordance with that Condition is sufficient for the relevant purposes of
that Condition but this presumption shall be rebutted, and shall not limit the right of the
Director to call for further Information under paragraph 1, if he states in writing that in
his opinion such Information is or is likely to be necessary for the purpose of carrying out
any of his functions under the Act.

M1

 

Condition N: Fees (replaced with effect from 1 April 1993(as amended in respect of subparagraphs
3.1 and 3.2, (and protocol) in accordance with the Secretary of
State’s approval, dated
1999/2000, further modified with effect from 24 November 2004.

	1.	 	Interpretation and Construction
	 
	 	 	In this Condition a “Periodic Review Year” means the Charging Year starting on 1st April
immediately preceding the start of a Review Charging Year.
	 
	2.	 	Fees

The Appointee shall render the following payments to the Secretary of State at the times stated:

	 	(1)	 	spent;
	 
	 	(2)	 	on 1st April 1990 and at the start of each subsequent Charging
Year an Year an amount equal to the costs estimated by the Director (in consultation
with the Competition Commission) as having been incurred in the preceding Charging
Year by the Competition Commission following:

	 	(a)	 	references under section 16 (section 14 of the 1991 Act) which
mention the Appointments (or either of them) only; and
	 
	 	(b)	 	references under Condition B or Condition C;

	 	(3)	 	on 1st April 1990 and at the start of each subsequent Charging Year an
amount, 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 the costs estimated by the Director (in consultation with the Competition
Commission) as having been incurred in the preceding Charging Year by the
Competition Commission following any reference under section 16 (section 14 of the
1991 Act) which mentions both the Appointments (or either of them) and also any
other appointment made under Chapter I of Part II of the Act;
	 
	 	(4)	 	Within thirty days of the date on which the Director notifies the
Appointee of the amount payable under this sub-paragraph, an amount equal to the
costs determined by the Director as having been or likely to be incurred by him in
respect of any reference by the Appointee under paragraph 13/14 of Condition B and
any determination by the Director under paragraph 14/15 of Condition B made in the
Charging Year in which the Director’s notification for the purposes of this
sub-paragraph is given;
	 
	 	(5)	 	on 1st April 1990 and at the start of each subsequent Charging Year a
renewal 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 the costs estimated by the Director as being likely to be incurred in
that Charging Year by him in the regulation and enforcement of

N2

 

	 	 	 	appointments made under Chapter I of Part II of the Act (including the
Appointments) and in the carrying out of his other functions under the Act,
including payments made by him under Schedule 4 (schedule 4 of the 1991 Act);
	 	 	 	 
	 	(6)	 	 on 1st April of the first Charging Year after the announcement
by the Director of his intention to carry out a Periodic Review, and at the sate 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;
	 
	 	(7)	 	where the Director so determines, on 1st January in any year, a special
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 the amount, if any, by which the aggregate of the costs estimated by the Director
to have been already incurred in that Charging Year and to be incurred in the
remainder of that Charging Year by the Director in the regulation and enforcement of
appointments made under Chapter I of Part II of the Act (including the Appointments)
and in the carrying out of his other functions under the Act, including payments
made by him under Schedule 4 [Schedule 4 of the Act] (schedule 4 of the 1991 Act),
exceeds the aggregate of:

	 	(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
	 
	 	(b)	 	all amounts (if any) payable in that Charging Year under
sub-paragraph 2(4) and the equivalent provisions in other appointments made
under the said Chapter I in respect of references and determinations of the
kind described in sub-paragraph 2(4);

	 	 	 	subject to his apportioning the special fee, according to the nature of the costs
intended to be covered by it, between the renewal fee, the additional fee and the
amounts referred to in paragraph (b); and
	 
	 	(8)	 	within 30 days of the date on which the Director notifies the Appointee
of the amount payable under this sub-paragraph, the amount derived from the
following formula:
	 
	 	 	 	1=Mxt/T
	 
	 	 	 	Where

I is the amount payable under this sub-paragraph;

N3

 

	 	 	 	M is the expenses, attributed by the Director to the Charging Year in which the
notification is given, of the Director, the Secretary of State and the National
Assembly for Wales in relation to the establishment of the Consumer Council for
Water;

t is equal to the turnover of the Appointed Business as shown in the accounting statements prepared
by the Appointee under Paragraph 4 of Condition F for the financial year ending twelve months
before the start of the Charging Year in which the payment under this sub-paragraph is payable;

T is equal to the aggregate of the turnover of the Appointed Business of all of the companies
holding an Appointment under Chapter 1 of Part 2 of the 1991 Act, as shown in their accounting
statements prepared under Para 4 of Condition F for the financial year ending twelve months
before the start of the Charging Year in which the payment under this paragraph is payable. ;
[changes in pink wef 24 November 2004].

	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
1 April 2000 (other than a Periodic Review Year) and part of any special fee apportioned to
the renewal fee payable in the same Charging Year shall not exceed X, where X shall be
calculated in any year by the equation:

	 	 	 	X= S x t

            T
	 
	 	 	 	Where the figures in the equation are defined as follows:
	 
	 	 	 	“S” is equal to the figure of £7.5M,  £11.9M  increased by the percentage increase in the
Retail Prices Index between that published for the month of  September 1989  November 1998 and
that published for the month of November immediately preceding the start 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 the Appointee under paragraph 4 of Condition F for the financial year ending
twelve months before the start of the Charging 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 their accounting statements prepared under Paragraph 4 of
Condition F for the financial year ending twelve months before the 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 fees payable under paragraph 2(6), in the years immediately preceding that
Periodic Review Year, shall not exceed a4igure-of-0-3, X derived from sub-paragraph 3.1 plus a
figure of 0.1, calculated as the sum of the percentages which each such fee represents of the
turnover of the Appointed Business, as shown in the Accounting Statements prepared by the
Appointee under paragraph 4 of Condition F,  for the financial year ending twelve months before
the start of the Charging Year in which

N4

 

	 	 	that fee is payable  as an
average over the five years
concluding with the previous
Periodic Review Year. (see
protocol at end of this
condition)

	3.3	 	Where:

	 	(1)	 	a Review Notice has been given under paragraph 7/8 of Condition B;
	 
	 	(2)	 	a Periodic Review falls to be carried out under paragraph 8/9 of
Condition B; or
	 
	 	(3)	 	a Reference Notice has been given under paragraph 9/10 of Condition B

	 	 	the Director may, by notice to the Secretary of State, refer to the Secretary of State for
determination by him not later than twelve months after the date which is the Review Notice
Date for the purpose of the relevant Periodic Review, the question whether the limits on the
fees specified in sub-paragraph 3.1 and 3.2 payable in respect of any Charging Year starting
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 any determination 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 of the appointment of each water only company and the higher number
refers to the same paragraph in the joint appointment of each water and sewerage undertaker.

N5

 

PROTOCOL FOR THE APPLICATION OF LICENCE CONDITION N3.2:

The original (1989) text defined the limit in terms of:

	 		 	* Amount: ie) a maximum of 0.3% of Turnover; 

 * Period of levy: ie) the Periodic Review Year (PRY).

 In practice work on and consequential expenditure for the Periodic Review is likely to take place
over a number of years running up to and including the PRY. The Director General therefore wished
to have the ability to levy fees to reflect the timing of those costs whilst remaining subject to
the same overall limit.

License paragraph N3.2, as amended, provides a mechanism to facilitate this flexibility within the
same overall limit, ie)

The current limit on fees for the PRY is 0.3% of turnover. Paragraph N3.2 allows those fees to
be levied in years preceding the PRY, eg)

	 	 	 	 	 
	 PRY 2 

	 	PRY – 1 
	 	 
	 

	 	 PRY	 	 
	 0.05 

	 	0.1%	 	 
	 

	 	 0.15%	 	 

Provided that the sum of the percentages does not exceed the figure of 0.3 from the original
Licence Condition.

However bringing forward payment of the fees would result in an increase in the Net Present Value
of the fees concerned. In order to off-set this the paragraph requires that the % in each year is
calculated by reference to the turnover appropriate to the Charging Year in question, rather than
to the turnover relating to the PRY. The resulting fee is therefore lower in cash terms as the
turnover from which it is calculated is smaller.

N6

 

Condition N places limits on the fees which the DG 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 previous
Periodic Review Year.

Illustrative Example — Revised Condition N

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Year	 	 	1	 	 	 	2	 	 	 	3	 	 	 	4	 	 		5	 
	Renewal fee
(base) £m
	 	 	11.90	 	 	 	11.90	 	 	 	11.90	 	 	 	11.90	 	 	 	11.90	 
	RPI at 2.5% per
annum £m
	 	 	0.29	 	 	 	0.60	 	 	 	0.91	 	 	 	1.23	 	 	 	1.56	 
	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
Periodic Review year
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.2	 
	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 = £6 million     

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,
the amount of additional fees will be kept lower, to only recover costs.

Ofwat in charging companies intends to keep well below the ceiling and would remain subject to
external scrutiny by HMT, NAO and the industry.

N7

 

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 make in relation to the area for which the Appointee holds the Appointment as
water undertaker under this instrument are where the Secretary of State has give the Appointee at
least ten years notice, expiring not earlier than 25 years after the transfer date, to terminate
the Appointment in relation to the whole of its area and the said period of notice has expired.

For the purposes of paragraph (c) of Section 7(4) of the Water Industry Act 1991, the only
circumstances in which an appointment or variation 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 25 years’
notice to terminate the relevant Appointment in relation to the whole of its area and that period
of notice has expired.] [deleted and inserted with effect from 15 October 2002]

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27 May 2005 — This is currently in the process of changing. Until the formal documents are signed
by the holding company this version cannot be changed — please speak to David Russell 1440 or
Stella Nash 1435.

Condition P: The Roles of the Appointee’s Owners.

	1(1)	 	The Appointee shall, not later than Friday 28 April 2000, procure from Biwater Capital Plc
and from Biwater Plc (or, if the latter shall at any time cease to be the ultimate holding
company of the Appointee, from the Appointee’s ultimate holding company) legally-enforceable
undertakings in favour of the Appointee in a form specified by the Director and expressed to
remain in force for as long as the Appointee retains the Appointment.

	1(2)	 	The undertakings referred to in (1) above shall provide that –

(a) those companies providing the undertakings will, and will procure that each of their
subsidiaries (other than the Appointee and its subsidiaries) will, give to the Appointee all such
information as may be necessary en enable the Appointee to comply with the requirements of the
conditions of the Appointment;

	 	(b)	 	those companies providing the undertakings will, and will procure that each of
their subsidiaries (other than the Appointee and its subsidiaries) will, refrain from
any action which would or may cause the Appointee to breach any of its obligations
under the Act or the conditions of the Appointment; and
	 
	 	(c)	 	those companies providing the undertakings will ensure that at all times the
Board of the Appointee contains not less than three independent non executive
directors, who shall be persons of standing with relevant experience and who shall
collectively have connections with and knowledge of the areas within which the
Appointee provides water services and an understanding of the interests of the
customers of the Appointee and how these can be respected and protected. 

	2.	 	The Appointee shall, not later than the date referred to in paragraph 1(1) above, produce to
the Director the original of each of the undertakings given to it under paragraph 1 of this
condition and provide to him such certified copies of those undertakings as he may require.

	3.	 	The Appointee shall immediately inform the Director in writing, if it becomes aware that
either of the undertakings referred to in paragraph 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 contract or arrangement with Biwater Capital Plc (or the ultimate holding
company of the Appointee as the case may be) Biwater plc or any Associated Company (other than
subsidiaries of the Appointee) at a time when:

O9

 

	 	(i)	 	no undertakings complying with paragraph 1 of this condition exist; or
	 
	 	(ii)	 	there is an unremedied breach of either of those undertakings.

O10

 

Condition Q: Interruptions in Supply because of Drought (coming into effect 19 April 1997)

	1.	 	Interpretation

	 	 	 	“business customer” means the person who is liable to pay the Appointee’s charges in
respect of a supply of water to premises other than domestic premises;
	 
	 	 	 	“drought order” means an order made under section 73 of the Water Resources Act
1991;
	 
	 	 	 	“household customer” means the person who is liable to pay the Appointee’s charges
in respect of a supply of water to domestic premises.

	2.	 	Liability and amounts of payments
	 
	2.1	 	Where a supply of water to premises is interrupted or cut off under the authority of a
drought order the Appointee shall, subject to sub-paragraph 2.2, pay to the customer (or
credit to his account) whichever of the amounts referred to in paragraph 3 is applicable.
	 
	2.2	 	The Appointee shall not be liable to make any payments under this Condition where the
circumstances were so exceptional that it would have been unreasonable to have expected the
interruption or cut-off to have been avoided.
	 
	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) the supply 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 of water charges payable to the Appointee by household customers for the
Charging Year preceding that in which 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) the supply is interrupted or cut off.
	 
	3.2.2	 	The amount payable to any business customer in any Charging Year shall not exceed -

	 	(a)	 	the amount of water charges payable by that customer for the supply of water to
those premises for the Charging Year preceding that in which the interruption or
cut-off happens or
	 
	 	(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 in respect of any separate supply which was provided solely for
purposes other than domestic purposes that shall be excluded. 

Q1

 

	3.3	 	If, when a payment becomes due under this Condition, a customer owes money to the Appointee
and the debt has been outstanding for more than 6 weeks, any payment from the Appointee to
which the customer is entitled under this Condition shall, to the extent that it does not
exceed the amount so owed, be made by way of 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 or credit under this Condition, the matter may be referred to the
Director by either party for determination.1

	4.2	 	Any determination under this Condition shall be final and, if the Appointee fails to give
effect to the determination, 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 the commencement date of any Regulations made by the Secretaries of
State pursuant to Section 38 of the Water Industry Act 1991, implementing the recommendations
made to them by the Director in May 1996 for the making 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 customers only, this Condition shall cease to have effect in so far as it relates to
those customers.

Q2

 

Explanatory Note about Condition Q4

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

	 	(a)	 	the resources available to the company and its management of those resources,
including the exploration of new resources;
	 
	 	(b)	 	the promotion by the company of the efficient use of water by its customers;
	 
	 	(c)	 	The company’s ability to prohibit or restrict the use of water by the exercise
of its powers under section 76 of the Water Industry Act 1991 (hosepipe bans) or by
obtaining a drought order containing the provision authorised by paragraph (b) of
section 74(2) of the Water Resources Act 1991 (non-essential use); and
	 
	 	(d)	 	the maintenance of the company’s assets, including the management by the
company of leakage.

Q3

 

Guide to Defined Terms

	1.	 	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 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
	The Measured Basket Item

	 	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
	The unmeasured Basket Item

	 	B
	 	Condition B, Part I
	Weighted Average Charges

	 	B
	 	Condition B, Part I
	Increase
	 	 	 	 

Guide page 1

 

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 of paragraph 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 the Interpretation Act 1978 referred in Column (3)(A) or, as the case may be,
Column (3)(B) below:

	 	 	 	 	 	 	 	 	 
	             (1)	 	     (2)	 	        (3)(A)	 	          (3)(B)
	 	 	 	 	Relevant provision of	 	Relevant provision of
	 	 	 	 	the Water Industry	 	the Interpretation
	 	 	 	 	Act 1991	 	Act 1978
	 	 	 	 	 	 	 	 	 
	Accessories

	 	B and J
	 	s.219(1)	 	 	 
	customer or potential

	 	E
	 	s.219(1)	 	 	 
	customer
	 	 	 	 	 	 	 	 
	Director

	 	Throughout
	 	s.219(1)	 	 	 
	discharge pipe

	 	L
	 	s.192(1)	 	 	 
	Functions

	 	A, B and E
	 	s.217&s219	 	 	 
	holding company

	 	A and F
	 	 	 	 	 	Companies Act 1985
	Information

	 	A
	 	s.219(1)	 	 	 
	Competition

	 	A, B, C, F & N
	 	s.219(1)	 	 	 
	Commission
	 	 	 	 	 	 	 	 
	new appointee

	 	B
	 	s.12(6)	 	 	 
	Notice

	 	Throughout
	 	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)
	 	 
	special administrator

	 	K
	 	Sch 6, para 12(2)
	 	 
	special administration

	 	K
	 	s.25(6), Sch 5, para
	 	 
	 

	 	 	 	1(4)	 	 	 
	Order

	 	 	 	Sch6, para 12(2)
	 	 
	subordinate

	 	B and L
	 	s.219(1)	 	 	s.21(1)
	legislation
	 	 	 	 	 	 	 	 
	Subsidiary

	 	A
	 	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(1)
	 	 
	Writing

	 	B, J, M and N
	 	 	 	 	 	s.5 and Schedule 1

Guide page 2

 

	3.	 	The lists of words and expressions under in the Conditions in paragraph 1 and 2 above are not
exhaustive lists of all the words and expressions used in the Conditions which are defined in
this instrument, the Act or the Interpretation Act 1978.

	4.	 	This guide to defined terms is for ease of reference only and shall not affect the
construction of any provision of this instrument.

Guide page 3EX-10.1.2

 

Exhibit 10.1.2

BOURNEMOUTH & WEST HAMPSHIRE

WATER INDUSTRY ACT 1991 SECTION 13

MODIFICATIONS OF THE CONDITIONS OF THE APPOINTMENT OF

BOURNEMOUTH & WEST HAMPSHIRE WATER PLC

Made on 10 March 2005

Coming into effect on 1 April 2005

The Director General of Water Services, in exercise of the power conferred upon him by section
13(1) of the Water Industry Act 1991, after giving notice as required by section 13(2) of that Act,
and with the consent of Bournemouth & West Hampshire Water PLC given on 9 February 2005, hereby
modifies with effect on and from 1 April 2005 the conditions of the appointment of Bournemouth &
West Hampshire Water PLC under Chapter I of Part II of the Water Industry Act 1991 as follows:

	 	1.	 	In paragraph 2 of Condition B, the definition of Average Charge per
Chargeable Supply is deleted and replaced with the following definition:
	 
	 	 	“	“Average Charge per Chargeable Supply” means, in respect of a specified
Unmeasured Basket Item for a specified year, the amount R/N where:

R is 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; and

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, provided that,
where the specified year is a Prior Year,

	 	(a)	 	there shall be included in N the number of any additional
Chargeable Supplies which the Appointee would have made as at such 1st
December if the Standard Charges to be made in respect of the Unmeasured
Basket Item in the relevant Charging Year had applied; and

 

 

	 	(b)	 	there shall be excluded from N the number of any Chargeable Supplies
which the Appointee would not have been entitled to make as at such 1st
December if the Standard Charges to be made in respect of the Unmeasured
Basket Item in the relevant Charging Year had applied.”

	 	2.	 	In the definition of Excluded Charges in paragraph 2 of Condition B, paragraph (6A) is
deleted and replaced with the following paragraph:

"(6A) Charges in any Charging Year for supplies of water (or for the provision of sewerage services
or for the reception, treatment and disposal of trade effluent) to premises where the premises were
supplied in the relevant Weighting Year with not less than such quantity of water as is specified
from time to time under section 7(5)(a) of the Water Industry Act 1991”.

	 	3.	 	The heading to paragraph 13 of Condition B is deleted and replaced with the following
heading:

		"13.	 	References to the Director relating to Notified Items and Relevant Changes of Circumstance
and circumstances having a substantial effect on the Appointed Business”

	 	4.	 	In paragraph 13.2 of Condition B, sub-paragraph (6) is deleted and replaced with the
following sub-paragraph:

	 	    "(6) (a)	 	where any part of an annual aggregate derived under subparagraph (5)
consists of items to which (b) below does not apply, what is the Net Present Value of
that part of the annual aggregate, 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 part of the annual aggregate derived under subparagraph (5) consist
of revenue and/or Operating Expenditure, what is the Net Present Value of that part
of the annual aggregate, calculated over 15 years; and

	 	(c)	 	what is the aggregate of the Net Present Values calculated under (a) and (b)
(“the Materiality Amount”);”.

	 	5.	 	In paragraph 13.2(8)(a) of Condition B, sub-paragraph (ii) is deleted and replaced with the
following sub-paragraph:

“(ii) all the Base Cash Flows at Outturn Prices (save in respect of Relevant Changes of
Circumstance falling within sub-paragraph (2) of that definition, where one half of the
Base Cash Flow at Outturn Prices

 

 

shall be used) attributable to the creation, acquisition or disposal of non-depreciable
assets (“Allowable Infrastructure Asset Expenditure”);”

	 	6.	 	Paragraph 13.4 of condition B is deleted and replaced with the following paragraph:

	“	13.4	 	A Reference Notice given to the Director in respect of sub-paragraph 13.2 shall contain or
be accompanied by reasonable details of the Relevant Item in respect of which the Reference
Notice is given and, unless the Director otherwise consents, shall be given not later than:

	 	(1)	 	the fifteenth day of September immediately preceding the first of the
Charging Years in respect of which the Appointee wishes the change to the Adjustment
Factor to take effect; or
	 
	 	(2)	 	if later, where the Director has given a notice to the Appointee under
paragraph 14.1 in respect of the same Charging Year, within fourteen days from the
receipt by the Appointee of that notice.”

	 	7.	 	Paragraph 14 of Condition B is deleted and replaced with the following paragraph:

	“	14.1	 	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)	 	the fifteenth day of September immediately preceding the first of the
Charging Years in respect of which he proposes the change to the Adjustment Factor to
take effect; or
	 
	 	(2)	 	if later, where the Appointee has given a Reference Notice to the Director in
respect of sub-paragraph 13.2 and falling within subparagraph 13.4(1) in respect of
the same Charging Year, within fourteen days from the receipt by the Director of that
Reference Notice

determine the questions set out in sub-paragraph 13.2 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 14.1 in respect of any number of Notified Items and Relevant
Changes of Circumstance and sub-paragraph 13.2 shall be construed accordingly.

 

 

	 	14.2	 	Where sub-paragraph 13.4(2) or 14.1(2) applies, the questions set out in (5) to (9)
inclusive of sub-paragraph 13.2 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.
	 
	 	14.3	 	In the case of sub-paragraph 13.3, the Director shall give notice to the Appointee of his
intention to determine the questions set out in subparagraph 13.3(1)(b) and (2).”

	 	8.	 	Condition H is deleted and replaced with the following Condition:

“Condition H: Code of Practice and Procedure on Debt Recovery

	 	1.	 	Unless it has already done so, the Appointee shall within two months after 1 April 2005
prepare and submit to the Director for his approval a Code of Practice which shall:

	 	(1)	 	give guidance to domestic customers who have difficulty in paying their
bills;
	 
	 	(2)	 	describe the range of procedures which may be adopted by the Appointee to
collect outstanding debt from domestic customers; and
	 
	 	(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 1(1) and 1(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
	 
	 	(4)	 	send a copy of the Code in its latest form free of charge to any person
requesting it.”

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