Sewage treatment works
Source: gov.uk (2025-04-28)

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

This section applies to all separately assessed sewage treatment works.

1.1 The function of a sewage treatment works

The primary function of a sewage treatment works (STW) is to treat effluent by the separation of the solids from the liquid and to make them safe before, in the context of liquid they are discharged, or in the context of sludge it is disposed of.

The area from which effluent is received by a particular STW is known as an “agglomeration”. Sewage treatment works are designed and operated to meet two specific characteristics. First, they are designed to deal with the specific nature of the effluent received from domestic waste water and industrial waste water within the agglomeration. Second, their design is dependent on the nature of the river, water course, estuary or sea into which the treated effluent is discharged.

The specific treatment facilities present on any STW will reflect these two characteristics. Environmental legislation has required effluent to be subject to an increasing level of treatment. The Sewage Undertakers have reacted by investing in plant to meet these demands. The main standards relate to the liquid discharged to the watercourse. These standards specify the discharge location, total volume of treated water permitted and the quality conditions of the discharged water, such as the biochemical oxygen demand (BOD), limits for suspended solids, ammonia, metals and toxic substances.

1.2 The Mechanics of Treatment

The level of treatment offered by a STW differs depending on the need of the receiving water. The range is from a simple septic tank which treats by settling, through to a sophisticated works dealing with a large urban population which will employ several stages.

1.2.1 Treatment of liquid effluent

The treatment of effluent, whether domestic or industrial is undertaken through a series of stages which typically involve slowing the passage of the effluent to allow for sedimentation or chemical precipitation and the addition or restriction of air to aid breakdown.

Treatment may be broken down into several stages; phrases such as preliminary, primary, secondary and tertiary are often used. As many works are very different in the type of treatment utilised these terms should be used with care as many variations exist.

The first stage or preliminary treatment occurs at the start of the works. The effluent is delivered by a sewer to the area known as the Inlet Works. The inlet works will comprise a set of screens, located in a chamber. The function is to remove the larger solids from entering the works. The screens may be of different grades from parallel metal bars to a finer mesh either 6mm or 3mm depending on design. Debris collects on the screens and is removed often mechanically. The debris is then taken to landfill, off the site by skip. Located after the screens is the detritor. The screened effluent is then slowed down to allow grit and glass to deposit out, but not slow enough for other matter in suspension to be deposited. The grit and glass at the base of the detritor is removed by scrapers or suction. This debris is also taken by skip to landfill. Effluent is then taken to the next stage.

Primary treatment removes the solids in suspension by settlement. This stage takes place in a primary settlement tank. The effluent is held in a tank allowing the solids to precipitate to the bottom. As effluent is introduced to the tank, the cleaner liquid passes over the weir in the tank and on to the next stage. The solids that have fallen to the bottom of the tank are removed by scrapers that continually revolve around the tank. The solids are known as sludge and are taken to another part of the site for further treatment. Some STW do not have sludge treatment facilities - in these circumstances the sludge is conveyed by tanker to another works which does have these facilities.

Secondary treatment is where effluent that has passed the earlier stages has air introduced to encourage the aerobic breakdown of harmful matter by aerobic action. This treatment may take place by several different methods.

Percolating filter beds: Here the effluent is distributed over the surface of a bed of graded inert medium (stone, slag, clinker) which usually has a depth of 1.8m. The distribution of the effluent is by moving arms that continuously sprinkle the effluent on the bed. The medium matter has a very high surface area which allows oxygen to be introduced to the effluent assisting the breakdown of harmful matter. A gelatinous film containing bacteria forms on the surface of the medium. The effluent from the base of the filter contains particles of detached film and other solids known as “humus”. This is removed at a further stage.

Aeration tank: These tanks deal with the same quality effluent that would pass through a percolating filter bed. The aeration tank contains only effluent through which air is introduced. Some methods employ air blown from the base of the tank, others use mechanical paddles to introduce oxygen. The effect is the same.

Tertiary treatment or final polishing takes place with the effluent that has passed through the secondary treatment process. The purpose of tertiary treatment is mainly to reduce the Biochemical Oxygen Demand, and levels of suspended solids and other substances on the receiving water by the final effluent. Several different tertiary treatment processes are found on STW; irrigation, settlement, straining, filtration and disinfection, examples include:

Irrigation - Historically grass plots were employed but reed beds are now the modern equivalent. The flow enters the reed bed through an inlet that is designed to produce even distribution. The plants selected allow the flow through to encounter aerobic and anaerobic areas.

Settlement - Flocculent is added, causing the suspended solids to settle out. They are then removed. A flocculent is a substance that encourages the settling of suspended solids by attaching to them and depositing, the flocculent may be recycled.

Straining - The suspended solids are retained by the surface of the straining fabric. Eventually the accumulated solids block the mesh and must be removed. This is done by backwashing. Filtration – Effluent is passed through a sand bed. The solids are retained within the bed and clear water passes through. Air is passed through the sand which separates the collected solids from the sand. The collected solids are then treated in the sludge line.

Disinfection - The Ultraviolet irradiation of treated sewage effluent renders the final effluent substantially disinfected. Required where discharges are made to bathing waters or shellfish growing areas.

1.2.2 Treatment of sludge

Sludge treatment occurs on a minority of STW sites in England and Wales. Most sites only separate the sludge from the liquid. Where a works does not have sludge treatment facilities, then the separated sludge will be taken by tanker or in some cases a dedicated pipe to a site that has the relevant facilities.

Various Statutory Instruments govern the way Sludge should be treated including: The Sludge (Use in Agriculture) Regulations 1989 as amended 1990. The Urban Waste Water Treatment (England and Wales) Regulations 1994.

The Urban Waste Water Treatment (England and Wales) Regulations 1994 prohibited the dumping of sludge at sea from the end of 1998, thus causing an increase in the need for sludge treatment facilities. There are several ways in which sludge can be treated. These include digestion, pasteurisation, composting, incineration and thermal drying, and these are considered below.

Sludge digestion

The most frequently encountered method of sludge treatment is digestion. The function of sludge digestion is three-fold, first to treat the harmful matter, second to reduce the mass of the solids, and third to facilitate the production of biogas. The harmful matter is subject to anaerobic degradation (without the presence of air). A typical Sludge digestion plant will comprise several stages: screening, blending, thickening, heating, primary digestion, secondary digestion, and finally dewatering.

Sludge will often be received to the site by two routes, the first indigenous sludge produced by the remainder of the works mainly through the primary settlement route. The second will be sludge brought to the site from other smaller works in the locality.

Sludge received from other sites will be subject to screening before being blended with the indigenous sludge and moved by pipe to the next stage thickening.

For sludge to be digested efficiently, the water content must be adjusted to around 94% – this is carried out in the thickening stage.

It is a requirement of the Department for Environment Food and Rural Affairs that sludge should be maintained during digestion at a specific temperature for a minimum specific period. Once the sludge has been subject to thickening it is then heated prior to being pumped into the primary digester. The heating takes place by pipes carrying hot water, the heat within the water is a waste product from the combustion of biogas produced by the primary digesters. The sludge is introduced into the primary digester in regular intervals in batchers.

Primary digesters can only operate full. As new material is introduced at the bottom of the digester the equivalent volume of primarily digested sludge is displaced at the top. Sludge within the primary digester undergoes anaerobic breakdown, and at various levels within the digester different microbes act to breakdown different material. The breakdown process releases bio gas which mainly comprises methane, hydrogen sulphide and carbon dioxide. The primary digester will generally comprise a concrete cylindrical tank with the top enclosed by a GRP lid. The biogas is collected at the top of the primary digester and taken for cleaning to a gas scrubber. The methane is burnt in gas engines on the Sewage Treatment Works to produce electricity and waste heat. The waste heat is utilised to heat water, for use on the site including the heating of the sludge prior to entry to the primary digesters. The electricity can be used on site or exported to the Grid. Methane is also used to agitate and mix the sludge within the primary digester by introducing it at the bottom of the tank from where it percolates up to the top.

After a period of time, that must at least be equal to the prescribed DEFRA standard, the digested sludge is displaced from the top of the digester. The sludge is still biologically active and is transferred to a secondary digester. These tanks are often of a cylindrical metal design with a sloping concrete base and are open topped. The sludge is then stored in the secondary digester for at least the prescribed minimum period. Following primary and secondary digestion a proportion of the solid matter has been converted to gas, therefore the water content of the digested sludge is higher than when it entered the primary digester. From the secondary digester the sludge is taken for dewatering, the water content is around 97%. Dewatering may take place by centrifuge or by sludge presses; the resulting solid matter is known as sludge cake. The liquid removed from the dewatering is fed back into the liquid treatment process. The sludge cake is stored on site until it can be put to land timing dependant on season and weather.

Sludge pasteurisation

The treatment of sludge by heating it to around 70 degrees Celsius for a minimum of 30 minutes. With the rapid throughput this technique allows the area of the site occupied by the sludge treatment facility to be of minimal size. The resulting product can be put to land.

Sludge composting

This method works by mixing dewatered sludge with a bulking agent such as sawdust, leaves, paper and wood chips. This facilitates an accelerated aerobic breakdown process at around 40 to 60 degrees Celsius. The time period varies but is in the region of 30 days. The resulting product can be put to land.

Sludge incineration

This method works by the dewatering of the sludge to around 25% solids using either centrifuges or filter presses. The sludge cake is then incinerated at around 850 degrees Celsius. This method is generally employed in areas which derived effluent from heavily industrialised catchments. In these areas, the sludge is likely to be significantly contaminated with heavy metals and so cannot be used for application to agricultural land.

Sludge thermal drying

The sludge is dewatered by centrifuges or filter presses; the sludge cake is then thermally dried to around 90%. The product in granular or pellet form can be used in agriculture or burnt in conjunction with coal in coal fired power stations.

1.2.3 Other methods of sewage treatment

Whilst the methods employed in treating effluent are fundamentally the same, settlement and aeration, the mechanics employed vary. Two alternative methods now being encountered are; Sequential Batch Reactors and Micro Straining.

Sequential Batch Reactors (SBR)

The effluent received from the sewer is subject to screening and de-gritting. Once this preliminary treatment has occurred the effluent is placed in a single tank within which all further treatment will occur. A sewage treatment works (STW) employing an SBR process may have additional tanks undertaking the same function. The batch of effluent is then subjected to sedimentation, aeration and tertiary treatment within the tank. The sludge is removed from the base of the reactor periodically and sent for treatment. The final effluent is then discharged to sea or river.

Micro straining

The effluent is first passed through a screen and de-gritting process, and then into an activated sludge aeration tank containing membranes filters. Over time the effluent is forced through the membranes filtering it before discharge.

1.2.4 Odour control

The sewage treatment industry has, since the 1990s, come under increasing pressure to mitigate or prevent odorous emissions from treatment plants. Sewage Treatment Works located near sensitive locations, such a tourist areas and residential conurbations were the first to start addressing this concern. Newly built STW run by water companies are likely to include some form of odour control, whilst existing works are increasingly having odour control facilities added.

In 2006, Defra published a ‘Code of Practice on Odour Nuisance from Sewage Treatment Works’ to provide guidance to local authorities, operators of sewage treatment works or other interested parties on how the statutory nuisance regime works, and on how to employ good practices in managing odour nuisance. This document was withdrawn on 15th September 2017 and Councils are tasked with investigating odour complaints that could be a statutory nuisance under the Environmental Protection Act 1990.

Odour is predominantly released in areas where effluent undergoes agitation. Odour control facilities will include covers to these areas such as an inlet works. The odorous gas is then conveyed by fans and ducts to an area for treatment before release to atmosphere. Where effluent treatment plant is contained in a building, then ducting will remove the odorous air from the building and separate ducts will introduce fresh air.

Several different means of treating the odour exist. The odorous gas will be passed through tanks containing media which extracts the odour before release. Several different types of media have been encountered they include; peat, heather, bark, cockles or seaweed.

1.2.5 Composting of green waste

Local Authorities are under increasing pressure to recycle household waste delivered to their municipal tips. An important element of this waste is garden or green waste. Green waste will include grass cuttings and cuttings from trees and hedges. Some Water Companies have agreed to process this green waste within the existing sewage works sites.

The process is relatively straight forward, although the specifics will vary from site to site. Green waste is delivered to the site in the form received at the municipal tip. The green waste is first passed through a shredder, to produce a uniform consistency. The shredded waste is then composted. This may involve storage and turning the composting material within windrows over a number of days until the composting process has occurred. Once the composting process is complete the compost is then removed from site either for private sale or use within the Local Authorities gardens.

The requirement of the composting process is to maintain a sufficient temperature for a sufficient period of time, to enable harmful bacteria to be removed.

It should be noted that the Mineral Surveyors team within Built Environment and Minerals Services (BEAMS) is responsible for the assessment of green waste composting sites (Land used for Waste Composting) under Scat code 150.

2. List description and special category code

List description: Sewage treatment works and premises

Primary description code: NW

SCAT code: 246 Scat

Suffix: S

3. Responsible teams

Responsibility for the valuation and referencing of this class of property lies entirely with the Industrial, Commercial and Crown Team within the National Valuation Unit (NVU).

4. Co-ordination

Responsibility for ensuring effective co-ordination lies with the NVU.

5. Legal framework

By virtue of the Local Government Finance Act 1988 Schedule 5, para 13 (1), no sewer, as defined by section 343, Public Health Act 1936, or accessory (manhole, ventilating shaft, pumping station, pump or other accessory) belonging to such a sewer, shall be liable to be rated. The overwhelming majority of sewage treatment works (STW), both in terms of number and size, are owned and operated by ten water companies operating under their statutory capacity of sewerage undertaker. The remainder comprise local authority owned and occupied works, and a small proportion of privately owned systems.

The volume and quality of discharges from a STW is licensed by the Environment Agency. The Environment Agency operates within the legislative framework established by the Department of Environment Food and Rural Affairs (Defra) and the National Assembly for Wales.

Water Companies, when investing in new plant on a STW, will have considered the requirements of the Works in the context of current and anticipated legislative requirements.

The Office of the Water Regulator OFWAT regulates the Water Industry determining the capital expenditure and charging structures. These are determined in five yearly cycles termed Asset Management Programmes (AMPs) and are agreed in advance of each 5-year period.

5.1 Identification of the Hereditament

As with all non-domestic hereditaments the first step is always to identify the hereditament regardless of any schedule 5 exemption issues. The guidance found in Rating Manual: section 3 part 1 - Hereditament should be followed.

5.1.1 Split site works

The increasing environmental standards have led to the requirement of additional treatment facilities being added to existing sites. Some small coastal sites have been faced with the need to expand their treatment facilities but without the presence of more land. In some cases additional treatment facilities have been built at a second site inland from the first. Sewers bring the effluent to the coastal site (formerly for discharge), the effluent is then screened and grit removed before the partially treated effluent is pumped inland to the second site. At the second site further treatment processes take place. The final effluent is then returned by pipe to the original coastal site before being pumped out to sea.

In these types of cases, care is needed to correctly identify the hereditament. After the start of treatment has been established at the coastal site, consideration of whether the sites could only be occupied together is required.

An indication of sites only being capable of being occupied together would include the screening of effluent at one site without duplication of the process at the second.

Where two sites are connected by transfer pipes, consideration should be given to whether the STW comprises one, two or potentially three hereditaments - See Webster (VO) v Yorkshire Water Services Ltd (2009) RA 317

All issues concerning these circumstances should be referred to the NVU technical lead.

5.2 Start of rateability

After identifying the hereditament the point of non- exemption must be determined. By virtue of the Local Government Finance Act 1988 Schedule 5, para 13 (1), no sewer, as defined by section 343, Public Health Act 1936, or accessory (manhole, ventilating shaft, pumping station, pump or other accessory) belonging to such a sewer, shall be liable to be rated.

Where treatment of effluent starts, the sewer is deemed to have finished and rateability starts. Several cases have explored this area.

A set of storm water tanks, located off a sewer, one mile from the STW had effluent diverted into it when the flow down the sewer exceeded 3 times dry weather flow. When the flow rate down the sewer returned to below 3 times dry weather flow, the effluent temporarily stored in the tanks flowed back into the sewer. If the tanks became full, the excess effluent after undergoing some settlement in the storm tanks passed over a weir into the river. The Lands Tribunal considered these facts in Jones (VO) v Eastern Valleys (Monmouthshire) Joint Sewerage Board (No.2) 1960 and concluded the storm tanks were an accessory to the sewer and hence not rateable.

The case of Gudgion (VO) v Erith Borough Council and London County Council LT 1960, CA 1961, concerned three sewers that flowed towards a STW. All three of the sewers reached a point where their flow was diverted in direction. On two of the three the sewage was pumped to a higher level in order to discharge into sedimentation tanks. The third continued to a sedimentation tank. The Lands Tribunal (LT) were asked to determine whether the change in direction of the pipe should be interpreted as a change in function of the pipe. The LT concluded that the function of the pipe and subsequent raising of the sewage to a greater height could in no way be interpreted as treatment, merely incidental to the function of conveyance. Hence exemption continued up to the point of discharge of the effluent into the sedimentation tank, the first point of treatment. The Court of Appeal agreed with this decision.

In Hoggett (VO) v Cheltenham Borough Council 1964, treatment was found to start at the screens. Effluent passed through the screens and a detritor, and then subsequently into sedimentation tanks. In this case if the flow exceeded a certain level, the excess would flow into a storm water tank. When the flow subsided the effluent was pumped back into the main sewer before the screens. The LT having determined that treatment had started at the screens found as fact that the storm water tanks were below this point in terms of the treatment process. As such the LT concluded that these storm water tanks should also be considered rateable.

What constitutes treatment can be a relatively simple action. In Hoggett it was the presence of screens. In the case of Fife County Council v Fife Assessor (1965) it was the physical maceration of sewage before discharge to sea.

5.3 End of rateability

When the liquid has passed through all the stages of treatment it will be ready for discharge to the water course or sea. If the pipe or conduit taking the treated liquid from the STW to the water course solely carries treated liquid it will be regarded as a drain and will remain potentially rateable up to the water course. The LGFA 1988 Schedule 5 Paragraph 13, as noted above, exempts sewers but not a drain.

Pipelines are named items and rateable under Class 3(g) of The Valuation for Rating (Plant and Machinery) Regulations 2000, except where they are a drain or sewer. An outfall pipe as a drain would therefore not be rateable.

Conduits are a named item and rateable under Class 4 Table 3 of the Regulations and therefore should be included.

If the pipe or conduit receives other liquid before reaching the water course, it is at this point that rateability ceases and the pipe or conduit will constitute a sewer.

Issues concerning the end of rateability should be forwarded to the NVU technical lead if they arise.

5.4 Appurtenance to domestic property

Where small STW are in the same ownership as the domestic properties which they serve, proposals to delete from the rating list on the basis that these STW as domestic may be received.

To determine whether a STW is an appurtenance to a domestic property requires consideration of the facts.

The relevant provision within the Local Government Finance Act 1988 (the 1988 Act) is contained within section 66 (1);

“(1)… property is domestic if- a. it is used wholly for the purposes of living accommodation b. it is a yard, garden, outhouse or other appurtenance belonging to or enjoyed with property within paragraph (a) above…”

There is no statutory definition of ‘other appurtenance’.

In the Lands Tribunal case of Martin v Hewitt (VO) [2003] RA 275, a case concerning boathouses on the shores of Lake Windermere, the President reviewed the authorities dealing with what is and what is not an appurtenance, and ruled;

“In all the statutory contexts that fell to be considered in these cases, therefore, ‘appurtenance’ was held to be confined to the curtilage of the building in question. I can see no reason for treating it as not so confined in section 66(1)(b) of the 1988 Act ”, and that “ “appurtenance” in section 66(1)(b) was not intended to encompass land or buildings lying outside the curtilage of the property referred to in section 66(1)(a) ”.

In the later case of Head (VO) v London Borough of Tower Hamlets [2005] RA 177 which concerned District Heating Systems (DHS), the President found it unnecessary to review again the cases that deal with the meaning of “appurtenance” and accepted that in the statutory context of the 1988 Act; “it embraces property that will pass with the principal subject matter of a conveyance without the need for express mention and is confined to the curtilage of the building in question.”

This principle was followed in the case of Winchester City Council v Handcock (VO) [2006] RA 265 concerning sewage treatment works. Here Winchester City Council had retained a number of small STW originally provided for Local Authority housing. It was submitted that the “right to use the sewage treatment works” fell within the curtilage of each freehold and was appurtenant to it and was therefore property which would pass on a conveyance of the freehold, that it was not necessary for the freehold of the residential units and the STW to be capable of being enclosed within one single red line on a map, and that the curtilage was extended by pipes connecting dwellings in the ownership of the appellant to the STW.

The Lands Tribunal held that;

” It is the physical hereditament comprising the sewage treatment works that must be within the curtilage of the dwelling (or dwellings), if it is to be appurtenant to it (or them)”.

In the case of Allen (VO) v Mansfield District Council & Bassetlaw District Council [2008] RA 60-69 2005 again concerning DHSs, these definitions were reaffirmed. In this case, the VO submitted, and the member accepted, that the proper analysis of the decision in Head 2005 is that a DHS constitutes an appurtenance within section 66(1) (b) if:

1. It is possible to identify a principal building. 2. This principal building is used wholly for the purposes of living accommodation. 3. The DHS in question is within the curtilage of this principal building and belongs to or is enjoyed with that property.

It should be noted that the curtilage of a building does not necessarily equate with the boundary of the property, although in most cases the boundary and the curtilage will coincide exactly. The curtilage of a building may on occasions be smaller than the extent of the property owned. Whilst for example a house and grounds may comprise gardens and outbuildings, it is a question of fact and degree whether the curtilage of the house would extend to include all or part of the gardens and all or part of the outbuildings. The extent of the curtilage is determined by several factors including the nature and size of the house, being the “principal subject matter of the conveyance.”

In the case of Head the VO contended that a DHS could not be an appurtenance to domestic property that comprised more than one occupation. In his decision the President rejected this contention. The President ruled that the definition contained in section 66(1) (b) was not worded in terms of occupation nor was there any reference to the term “hereditament”.

The example cited by the President in that decision was that of a boiler house situated on the top floor of a multi storey building. The building contained several property interests; statutory tenants, long leaseholders and the freehold. The accommodation in the building was wholly residential. The building and the boiler house were in the same ownership. The President concluded:

“the boiler house and the associated pipework within the building would pass on any conveyance of the building. The DHS can properly be said, therefore, to be appurtenant to the residential accommodation and to belong to it”.

In Winchester the VO advanced that a sewage treatment works serving an estate of houses all in single ownership might satisfy section 66, as it did in Head, but once the freehold of any of the dwellings was disposed of and the sewage treatment works continued to serve it, it could not be ‘appurtenant’ to them. As the VO succeeded in the principal argument that the sewage treatment works did not fall within the curtilage of any dwellings that they served, it was not necessary to consider this further submission. The Lands Tribunal however gave an obiter view that the submission was too broad and concluded;

“It seems to us to be possible to envisage situations where a part of a curtilage is disposed of by freehold sale and continues to be served by the sewage treatment works, yet the circumstances are such that the sewage treatment works is still capable of satisfying the words of section 66 (1)”.

The member in Allen agreed with these obiter remarks.

Taking into account the effect of these decisions, the following tests should be carried out, in the order that they are shown below, when deciding whether or not a STW is an appurtenance to property that is domestic. The STW must satisfy all the tests to qualify as domestic property.

i. Identify the building(s) that are served by the STW. A block of flats, a terrace of houses or an individual house may constitute the “principal subject matter of the conveyance” in question. An estate comprising a multitude of different buildings would not.

ii. Establish that the above is wholly domestic.

iii. Identify the “curtilage” of the domestic property.

iv. Establish that the STW in the same ownership as the “principal subject matter of conveyance”.

v. Establish that the STW is wholly located within the curtilage of the “principal subject matter”. This will be a matter of fact and degree in every case.

vi. Establish that, by its nature the STW would pass without mention in a conveyance of the principal subject matter.

If the STW satisfies all of the above criteria then it is an appurtenance to domestic property, and therefore is itself domestic property. Such systems should not be shown in a non-domestic rating list.

Examples

A small terrace of four houses set in a small, shared garden. Within the garden is a septic tank that serves all four properties. The four properties are owned by the local authority as is the garden and the septic tank. In this case the curtilage of the domestic building (the principal subject matter) would extend to include the septic tank. The septic tank would “pass without mention in a conveyance “of the “principal subject matter” and so the septic tank would be considered an appurtenance to domestic property.

A crescent of sixteen semi-detached houses. A green area within the crescent housing a small STW. Some of the houses are in different ownership having been purchased under Right to Buy provisions; the remaining houses and the STW are in the same ownership. The STW could not be said to be in the curtilage of any one of the buildings and it could not be envisaged to be able to pass without mention. As such the STW cannot be an appurtenance to any of the eight pairs of semis. The STW is non-domestic.

5.5 Rateability - plant and machinery

The instructions contained in Rating Manual: section 6 part 5: plant and machinery (https://www.gov.uk/guidance/rating-manual-section-6-part-3-valuation-of-all-property-classes/valuation-of-plant-and-machinery) should be followed. The nature and extent of Plant and Machinery encountered on a STW may vary widely, however the main items encountered can be found in the sewage works section of the Cost Guide. Several tribunal cases have tested the extent of rateability on certain items found on a sewage treatment works.

In Jones (VO) v Eastern Valleys (Monmouthshire) Joint Sewerage Board (No.1) 1958 the LT were asked to decide whether certain items of plant and machinery found on a STW were rateable, as falling within Class 4 of the Schedule to the Plant and Machinery (Valuation for Rating) Order 1927.

The mechanical iron screens of the screening chamber were found not to be part of the tank or chamber that held them and consequently not rateable.

The scrapers attached to a revolving bridge over a sedimentation tank were found not rateable as they could only be brought within the Order as part of the tank in which they were situated, and the member decided on the evidence that they play no part in the treatment of the sewage for which the tank was designed. The member also considered that that they did not appear to be in the nature of a building or structure.

Media contained within sludge beds and bacteriological beds, held not part of the chamber nor being in the nature of a building or structure, hence not rateable.

Rotating sprinkler apparatus of bacteriological treatment beds, held not part of the chamber nor being in the nature of a building or structure, hence not rateable.

In Wessex Water v Barnes (VO) 2004 the Valuation Tribunal considered the rateability of sludge holding tanks under 400m3, constructed from a concrete base and metal sides. The tanks were formed by the setting of a concrete pad upon which the metal sides were constructed within a lip in the concrete. The metal sides could be unbolted and moved to another site and re-erected on another concrete pad. The concrete base could only be removed by breaking it up.

The Valuation for Rating (Plant and Machinery) Regulations 2000 provides that where a named item in Class 4 Table 4; a tank; is less than 400 cubic metres then to be rateable the item needs to satisfy the provisions in Class 4.

(a) any such item which is not, and is not in the nature of, a building or structure;

(b) any part of any such item which does not form an integral part of such item as a building or structure or as being in the nature of a building or structure.

(c)….(not relevant)

(d) any item in Table 4 the total cubic capacity of which (measured externally and excluding foundations, settings, supports and anything which is not an integral part of the item) does not exceed four hundred cubic meters and which is readily capable of being moved from one site and re-erected in its original state on another without substantial demolition of any surrounding structure.

The Valuation Tribunal found that as a matter of fact the tank, the concrete pad, and metal walls were integral to the tank. Whilst it was possible to unbolt the metal sides and re-erect them at another site on another concrete pad, this did not constitute its “original state”. The tank was therefore rateable.

The question of rateability of plant and machinery used for odour control under Class 2 was also in contention in Wessex Water. The STW had contained all the effluent treatment processes within two buildings. Odorous air was extracted by fans and ducts from two parts within the buildings. First immediately above treatment plant, and the second from within the building in general. Fresh air was introduced to the buildings by a separate set of ducts. The odorous air was then taken to scrubbing plant that chemically cleansed the air before it was released.

The Valuation Tribunal found that at the STW, the received effluent comprised three parts requiring treatment, the liquid, the sludge and odorous gas emitted during the separation and subsequent treatment of the first two. Plant and machinery used to treat the odorous gases, the Valuation Tribunal held, constituted plant and machinery under Class 2 “which is in or on the hereditament and is used or intended to be used in connection with services mainly or exclusively as part of manufacturing operations or trade processes”. These items of plant and machinery were therefore found to be not rateable under Class 2.

It should be noted that several of the items of plant and machinery however comprise named items under Class 4. These items include ducts, foundations, settings, supports and tanks. Notwithstanding the position under Class 2, these items should be tested against the provisions of Class 4 to ascertain their rateability.

6. Survey Requirements

Sewage Treatment Works (STW) are potentially hazardous environments. Before entering onto a STW, staff must familiarise themselves with the health and safety advice found on the Human Resources Health and Safety Homepage (Sewage Treatment Works). It is essential that all, staff comply with the requirements laid down in the Method Statement and Risk Assessment (STW Method Statement). When inspecting a STW, it is important to understand the operation to be able to take note of relevant matters. It is recommended when inspecting a STW to carry out the inspection in the same order as the process.

6.1 Background

Sewage treatment works (STW) vary considerably in size and nature, and a large amount of plant and machinery can be present on sites. By the nature of some plant it may be extremely difficult to gain comprehensive details by inspection. Where possible copies of plans of the site should be obtained from the site operators to permit scaling of dimensions.

6.2 General Considerations

The object of the survey is to provide a factual picture of the works with sufficient detail of the items to enable the Valuer to form an accurate and comprehensive picture from which to form a valuation.

6.3 Buildings

The preferred basis of measurement will be Gross Internal Area (GIA) for buildings.

6.4 Plant and machinery

Sewage treatment works (STW) contain a considerable number of items of plant and machinery named in the relevant Valuation for Rating (Plant and Machinery) Regulations. Rateability should be tested in accordance with the principles set out in Rating Manual: section 6 part 5: plant and machinery (https://www.gov.uk/guidance/rating-manual-section-6-chhallenges-to-the-rating-list/part-5-plant-and-machinery).

STW are continually being required to increase the quality of their discharge. This necessitates the regular addition of new plant and machinery and the removal of old. In some cases de-commissioned plant is left in situ, and consideration of its value must be undertaken.

Where costings for a new item of plant or machinery are obtained these should be passed to the Building Surveyor or Plant and Machinery Valuer as appropriate.

Where a new STW has been constructed, the Sewage Treatment Works NVU Technical Lead should be notified and a request made for the costs.

6.5 New developments

The sewage treatment industry is constantly developing; where new items of plant and machinery are encountered details should be taken and passed to the Sewage Treatment Works NVU Technical Lead. Similarly if representations or proposals are received relating to new industry developments that may have an effect beyond the particular hereditament, details should also be taken and forwarded.

6.6 Items Found on Sewage Treatment Works

Details of common items found on a STW may be found within the Valuation Office Agency Cost Guide under Sewage Treatment Works. Below is set out examples of these items including the names to which they may be commonly referred.

“Well” or “chamber” rateable as a “tank” or “chambers and vessels”. Pumps, motors, screens and other ancillary equipment, if any, should be excluded. The “main” from the well to the detritus tank. Rateable as a conduit.

Detritus tanks, in which sand and gravel are precipitated during preliminary treatment. Rateable as “tanks” or “chambers and vessels”. Rateability extends to walkways, handrails and catwalks, but not to screens, screen cleaners, grit removal plant or automatic switch gear.

Storm water tanks, where not within the line of the incoming sewer, are rateable. Rateable either as “tanks” or as “chambers and vessels”.

Primary sedimentation tanks (PST), the solids in the effluent after screening and detritor settles in the PST. Rateable as “tanks” or “chambers and vessels”. Sedimentation or settlement and the removal of liquid sludge from the base of the tanks may be mechanically assisted, but items so used (scrapers and pumps, together with motors, control gear and accessories) are not rateable.

Sludge primary / secondary digestion tanks - Rateable as “tanks” or “chambers and vessels” Rateability extends to the roofs, floating or fixed, these are installed for retention of heat and methane collection. Automatic control gear is not rateable, nor are the heating pipes within the tank where (as is usual) they are not part of the tank as a structure.

Sludge drying beds - Rateable as a “bed or bay” or as “tanks” but excluding any mechanical aid for the removal of dried sludge or any clinker in the beds acting as a filter.

Bacteriological beds - Rateable as “tanks”. Though they vary in construction, the rateable portions will usually comprise the concrete conduits and beds on which the medium rests, the retaining walls for the medium and all walkways, stairways, catwalks and handrails. The sprinkling devices and the medium itself are not rateable.

Humus or final settlement tanks - or tertiary treatment. Rateable as “tanks” or “chambers and vessels”.

Pipes - Following the Valuation Tribunal decision in the case of Yorkshire Water Services Ltd v Varley (VO) (1995), it is accepted that a sewage treatment works is a factory within the meaning of the Factories Act 1961. Accordingly, all pipes within a sewage treatment works, comprising relevant premises, are excluded from the valuation.

Pumps - Sewage, sludge and liquor pumps, together with their motors and accessories, are not rateable, however their settings and foundations will be rateable under class 4.

Bio disk unit - These comprise prefabricated equipment within a tank generally under 400m3. The tank with equipment inside is situated in a pit. At the bottom of the pit will be a concrete base, the gap between the bio disk and the sides of the pit may be filled with concrete or pea shingle. Where the bio disk is encased in concrete then both it and the concrete comprise a rateable tank. The inner workers still remaining not rateable. Where the bio disk can be extracted whole from the pit then merely the foundation and pit is rateable.

Reeds beds - The bed itself is rateable, as are other items such as tanks, chambers and conduits forming part of its operation but not the reeds.

Bio gas holders - The bio gas holder is a storage tank for low pressure dry gas storage. It comprises a concrete base slab to which the outer membrane of polyester fabric is attached via an anchorage ring. An inner tank of more flexible material is present and it is within this that the gas is stored. The gap between the inner and outer membranes is subject to varying air pressure regulated by air blowers. The holders are rateable as “tanks” or “gas holders” and the concrete slab as foundations.

7. Survey capture

In general survey details should be recorded electronically and stored in EDRM in the property file for the appropriate hereditament.

It is recognised that this is impractical for the larger works consisting of hundreds of individual items. Accordingly larger works should be recorded manually in binders held by the NVU Industrial Commercial and Crown Team.

8. Valuation approach

Sewage Treatment Works (STW) should be valued on the contractor’s basis in accordance with Rating Manual Section 4: Part 3: The Contractors Basis of Valuation (https://www.gov.uk/guidance/rating-manual-section-4-valuation-methods/part-3-the-contractor-s-basis-of-valuation), and the relevant practice note for this class.

8.1 Stage 1 – Estimated Replacement Cost (ERC)

All the buildings, civils and rateable items of plant and machinery commonly found in this type of property should be costed from the information provided in the Rating Cost Guide for the relevant revaluation period. Adjustments to the costs where appropriate, are required for location, contract size and fees. These should be in accordance with the advice contained in the appropriate rating cost guide unless specifically stated in the relevant practice note for this class.

8.2 Stage 2 – Adjusted Replacement Costs (ARC)

The guidance for making adjustments to reflect obsolescence and age-related disabilities are set out in the relevant practice note for the relevant revaluation period see Rating Manual Section 4: Part 3: The Contractors Basis of Valuation (https://www.gov.uk/guidance/rating-manual-section-4-valuation-methods/part-3-the-contractor-s-basis-of-valuation). Note from Reval 2017 sewage treatment works were brought into line with other industrial properties valued by reference to the contractor’s test and the guidance below should be followed. Prior to Reval 2017 sewage works had their own bespoke allowances and these tables should not be followed for valuation lists prior to 2017. For allowances prior to Reval 2017 please consult with the Sewage Treatment Works NVU Technical Lead.

8.2.1 Buildings

From Reval 2017 allowances for buildings should not exceed those set out in the buildings column of the age and obsolescence tables in accordance with Rating Manual Section 4: Part 3 (https://www.gov.uk/guidance/rating-manual-section-4-valuation-methods/part-3-the-contractor-s-basis-of-valuation)for the relevant revaluation.

8.2.2 Civils

Sewage treatment works by the nature of the material processed are subjected to corrosive material. The design and construction of sewage works acknowledge and compensate for this. Rebuilding a sewage works is expensive and so individual items tend to be designed to operate over a long life span. From Reval 2017 allowances for civils should not exceed those set out in the civils column of the age and obsolescence tables in accordance with Rating Manual Section 4: Part 3 (https://www.gov.uk/guidance/rating-manual-section-4-valuation-methods/part-3-the-contractor-s-basis-of-valuation) for the relevant revaluation.

Allowances for civils should be applied to all civil items including concrete chambers, tanks, conduits and beds.

8.2.3 Metal tanks

From Reval 2017 allowances for metal tanks should not exceed those set out in the metal tanks column of the age and obsolescence tables in accordance with Rating Manual Section 4 Part 3 for the relevant revaluation. Foundations, steel supports, bund walls and bund bases that are directly ancillary to the tank should generally follow the allowance applicable to the item which they relate.

8.2.4 Other plant and machinery

From Reval 2017 allowances for plant and machinery should not exceed those set out in the P&M column of the age and obsolescence tables in accordance with Rating Manual Section 4 Part 3 for the relevant revaluation. Steel supports, concrete bases/foundations that are directly ancillary to the item of plant or machinery should generally follow the allowance applicable to the item which they relate.

8.2.5 Site Works

From Reval 2017 allowances for items of site works which serve the property such as yards, parking areas, landscaped areas, open storage areas, boundary fencing, underground site services and lighting should be based having regard to the following:
- Where the items of site works serve a particular building the allowance should follow the allowance made on the building to which they relate.
- Where the items of site works serve the property as a whole the allowance should be based on the overall average allowance derived from the allowance made for all the buildings, civil works, plant and machinery items present on the site.
8.3 Stage 3 - Estimation of Cost of the Land

The value to be adopted for the land should be on the basis of a cleared site with such services, as existed at the relevant date, available for connection and with planning permission for sewage treatment reflecting all advantages and disadvantages of the site and its location.

The land to be valued is all the land occupied by the hereditament. In the case of a large STW this may comprise; developed land, land for future development or redundant land, and land used for visual screening purposes. Valuer judgement is required on the level of value attributed to each of these uses.

Reference to the prevailing use value in Dawkins (VO) v Royal Leamington Spa & Warwickshire CC (1961) must be approached with care. The prevailing use value in the locality should not be assumed to automatically represent the value of a STW site rebus sic stantibus. The hypothetical tenant when judging whether to take the hereditament on offer or to build an “exactly similar” one will judge the level of value of alternative sites in the locality.

Land that is ideal for a STW is low lying, sloping, and near a water course, river or sea. Such land may have inadequate load bearing capacity for the loads to be placed upon it, and this may necessitate additional costs of construction. These extra costs may have an impact on the level of value the land will attract.

Conversely the STW must be located at the end of the existing system of sewers and as such the actual site would be uniquely suitable to receive these sewers and this may influence the level of land value.

Land should not be calculated by a % of ERC. From Reval 2017 allowances for the land should be based on an overall average allowance derived from the individual allowances made at Stage 2 for the buildings, civils, and rateable items of plant and machinery situated on the site.

For further background information reference should be made to the Rating Manual Section 6: Part 3 (https://www.gov.uk/guidance/rating-manual-section-6-part-3-valuation-of-all-property-classes/valuation-of-plant-and-machinery)

8.4 Stage 4 - Decapitalisation Rate

The relevant Statutory Decapitalisation Rate for this class of property must be adopted.

8.5 Stage 5 – Overall Consideration

This is often referred to as the “stand back and look” stage. At this stage of the valuation care must be taken to ensure that adjustments are only made for matters which have not already been allowed for at stages 2 and 3. Typically matters to be considered at this stage concern whether or not any end adjustment to the valuation should be made. Such matters for consideration would be in respect of disabilities that have an effect the site as a whole such as layout and access. Care should also be taken to avoid double counting where disabilities are already reflected in the site value.

8.5.1 Under-working Allowances (previously known as superfluity allowances)

Underworking allowances are a Stage 5 allowance to reflect overcapacity in the works in both the hydraulic and biological rateable assets. It may be that there is overcapacity in just one of these sets of assets if so, that should be evidenced by the water Company and if applicable considered at Stage 1 or 2 of the valuation not Stage 5.

Sewage treatment works are designed to meet discharge standards regulated by the Environment Agency. Each STW is licenced by the Environment Agency to discharge certain volumes of treated effluent to the required environmental standard. These standards are determined by the nature of the watercourse or sea that the STW discharges into. A STW is designed to meet increasing levels of treatment and a projected level of demand several years in advance.

The level of projected demand is ascertained by the Water Companies and the Environment Agency. The projected demand is quantified by calculating the “population equivalent” and the Dry Weather Flow Consent for the area served by the STW at a certain date in the future.

Population Equivalent is a notional population comprising; resident population, a percentage of transient population, cessed liquor input expressed in population, and trade effluent expressed in population.

An under-working allowance will only be considered where the design population equivalent substantially exceeds the actual population equivalent, the consented dry weather flow substantially exceeds the actual dry weather flow at the material date, and the reason for this, can be identified.

Reasons for under-working may include, the closure of industry in an area thus considerably reducing the demand on the STW, or a STW built for projected population growth that has failed to materialise.

No allowance for under-working should be given unless the following information is supplied by the Water Company identifying the reasons for the difference between the sets of figures;

(a)The Design Population Equivalent of the STW as at the material day, expressed in terms of population comprising; static population, proportion of transient population, cessed liquor input and trade waste. For the avoidance of doubt in relation to the table of allowances below design population equivalent should be calculated using the following formula

Design flow (m3) = PG + I + E where P = domestic pop, G= consumption per head of pop, E = trade effluent

G is assumed to be 160 l/hd within STW, I is assumed to 30% of G = 48l/hd

Therefore F in m3/(G+I m3/hd) = P + E (hd) = design equiv pop

For example assuming a works with a consented/design DWF of 1000 m3/d the calculation of the design population equivalent is as follows

1000m3

(160 l/hd +48 l/hd) x 0.001 (conversion of lts to m3)

Therefore, design equiv pop (derived from design flow) is 4808

(b)The Actual Population Equivalent, as at the material day, expressed in terms of population comprising; static population, proportion of transient population, cessed liquor input and trade waste.

(c) Dry Weather Flow Data to support the above.

8.5.2 Flow Meter Records

STWs are now required to measure the volume of effluent discharged to a river, watercourse or the sea. The measuring and installation of flow meters is a requirement of the Urban Waste Water Treatment Regulations 1994 and is monitored by the Environment Agency.

These flows now form part of the modelling that the Water Companies and Environment Agency use to calculate the required capacity of a STW. Each STW has a Dry Weather Flow Consent from the EA.

Where the dry weather flow data and inspection reveal the possibility of an overworking allowance, this will be supported by the agent providing the correct population data in order to calculate an allowance as below.

Dry weather flow data should be examined for the appropriate years and compared with the information provided in respect of the population data, any discrepancy should be examined to verify the accuracy of either sets of figures.

It may be expected that the flow data should be consistent with the population data, however, this does not always occur. If the flow data suggests the average Dry Weather Flow of the works is high by comparison to the Dry Weather Flow consent, then it does suggest that the works is built to a sufficient capacity, and no allowance should apply. Applying a similar percentage as that of the population data may be seen to highlight the ‘under-working’ element.

Note if an inspection reveals substantial redundant areas and tanks and the valuer takes into account redundancy at Stage 1 or 2 of the contractors test, a superfluity allowance is unlikely to be applicable at Stage 5.

8.5.3 Sludge Treatment Facilities on an STW

Where a STW receives sludge from other sources or sites, these facilities are not directly linked to the Design Population Equivalent of the site. Therefore any under working allowance should not be given on sludge treatment or handling facilities contained on a STW, in these circumstances.

8.5.4 Individual Plant

Where issues are raised citing the under working of individual plant or series of plant items then these matters should be referred to the sewage treatment works NSU Technical Lead. Where issues are raised citing the under working of a whole sewage works, recourse should be made to the calculation in paragraph 8.5.5.

8.5.5 Under-Working Allowance Calculation

In order to quantify an under working allowance the following calculations should be undertaken.

Actual Population Equivalent of STW (supplied by the Water Company) X 100

Design Population Equivalent of STW (supplied by the Water Company and calculated using the formula at 8.5.1)

Ave Dry Weather Flow Recording (supplied by the Water Company) X 100

Consented DWF (supplied by Water Company)

This will result in a % of use that the STW is operating. The table below gives the percentage reduction to be applied to the STW at Stage 5 of the valuation, subject to the considerations above.

Where the population equivalent and flow data are consistent (within 5% of one another) then the population equivalent calculation should be the measure for the underworking allowance not the lowest common denominator. If the data is inconsistent (more than 5%) then the lowest common denominator should be taken for the allowance.

Where the population equivalent and flow data are consistent (within 5% of one another) then the population equivalent calculation should be the measure for the underworking allowance not the lowest common denominator. If the data is inconsistent (more than 5%) then the lowest common denominator should be taken for the allowance.

8.6 Effluent Treatment on Other Hereditaments

Hereditaments comprising industrial facilities or chemical processes may contain plant and machinery for the treatment of industrial effluent in conjunction with their domestic waste water. In these circumstances plant and machinery may be rateable under Class 2 services to the hereditament, subject to the tests therein, in addition to Class 4.

9. Valuation Support

This class of property is valued using the non-bulk server. VOA - Non bulk server manual

Practice note: 2023 - valuation approach for sewage treatment works

1.0 Market Appraisal

1.1 Historically sewage treatment works (STW) are operated by the main water companies, who have inherited historic buildings with old plant and machinery and large areas of land, predominantly retained for potential future site extension.

1.2 As these sites are run by the main local water companies, there is no likely foreseeable new entrant operators expected to move into this market, and therefore no competition for such sites.

1.3 With increasing global requirements for ecological and environmental improvements, there is a continuous requirement for review of the treatment processes. Environmental law tends to dictate the requirements for the treatment of effluent. This is an area of law subject to regular review, often leading to the water companies having to change the way they operate their sites. These changes in operation also reflect the continuous changes in technological progression in treatment techniques.

1.4 The water and sewerage sector in the United Kingdom varies widely by geography. Companies are owned, run and often subsidised by the government in Scotland and Northern Ireland, while the sector is completely privatised and largely regulated by a non-governmental body known as the Water Regulatory Authority (OFWAT) in England and Wales.

1.5 Scotland and Northern Ireland have only one overseeing body, but differences in tariff. Water is cross subsidised in Scotland and completely subsidised in Northern Ireland. In England and Wales, OFWAT controls water tariffs and ensures that they remain reasonable for the customers while also allowing profit for providers.

1.6 As a result, UK water companies follow a well-defined, five-year Asset Management Plan (AMP) to ensure continuous improvement based on guidelines set by the regulator of the water and sewerage sector in England and Wales, OFWAT. Perhaps the most important action of OFWAT is to regulate the industry price limits, ensuring that investors get sufficient returns while customer interests are not compromised. As at 1st April 2021, each company is towards the middle of their AMP7 period (2020-2025), which is governed by OFWAT’s price review PR19.

2.0 Changes from the Last Practice Note

2.1 With the exception of the market appraisal, there are no changes from the 2017 Practice Note.

3.0 Ratepayer Discussions

3.1 There have been no central discussions with representatives for the industry that have resulted in an agreed scheme at date of publication.

4.0 Valuation Scheme

4.1 Very few sewage treatment works have ever been let in the market, and those that have will usually have been let under unusual terms. Therefore the valuation of sewage treatment works is by reference to the contractor’s basis of valuation with costs being derived from the 2023 Valuation Office Cost Guide. The contractor’s basis of valuation is to be applied in accordance with VOA Rating Manual Section 4- Part 3: the contractor’s basis of valuation (https://www.gov.uk/guidance/rating-manual-section-4-valuation-methods/part-3-the-contractor-s-basis-of-valuation), using the guidance in relation to each stage of the valuation process.

4.2 The appropriate statutory decapitalisation rate for Reval 2023 must be adopted at stage 4.

Practice note: 2017 - valuation approach for sewage treatment works & sewage

1. Market Appraisal

Historically, Sewage Treatment Works are operated by the main water companies, who have inherited historic buildings, with old plant and machinery, and large areas of land, predominantly retained for potential future site extension.

As these sites are run by the main local water companies, there is no likely foreseeable new entrant operators expected to move into this market, and, therefore, to establish any competition for such sites.

With increasing global requirements for ecological and environmental improvements, there is a continuous requirement for review of the treatment processes.

As European Law tends to dictate the allowances for the treatment of effluent, there are constant changes in law, most of which sees the water companies having to change the way they operate their sites, and particularly having regard to the continuous changes in technological progression for treatment techniques.

As a result, it is likely that improved technology may lead for the need for smaller sites, in more remote locations, but this may lead to higher equipment costs.

It must be further noted that the cost of removal of some of the redundant and more historic pieces of equipment probably far outweighs the need for the space. Therefore many older sites do tend to have large pieces of redundant equipment in existence, and the assumption really should be that these are unlikely to be required for use ever again.

By comparison to historic constructional practices, the modern equivalent approach seems to show less traditional buildings being constructed on these sites, and leans more towards the cheaper GRP constructed Machine Control Centre Kiosks.

Sewage Treatment Work sites tend to require a realistic approach to dealing with any stand-by capacity requirements, as weather fluctuations and its’ uncertainty can never be ignored or overlooked.

It therefore needs to be borne in mind that whilst something may appear to be a redundant piece of kit or equipment, it may still be functionally required in times of high flow during prolonged periods of rainfall for example.

The water and sewerage sector in the United Kingdom varies widely by geography. Companies are owned, run and often subsidized by the government in Scotland and Northern Ireland, while the sector is completely privatized and largely regulated by a non-governmental body known as the Water Regulatory Authority (OFWAT) in England and Wales.

Adding to the complexity, Scotland and Northern Ireland have only one overseeing body, but differences in tariff. Water is cross subsidised in Scotland and completely subsidized in Northern Ireland. In England and Wales, OFWAT controls water tariffs and ensures that they remain reasonable for the customers while also allowing profit for providers.

As a result, UK water companies follow a well-defined, five-year Asset Management Plan (AMP) to ensure continuous improvement based on guidelines set by the regulator of the water and sewerage sector in England and Wales, OFWAT. Perhaps the most important action of OFWAT is to regulate the industry price limits, ensuring that investors get sufficient returns while customer interests are not compromised. For the years 2010-15, each company has just completed their AMP5 period, so the current period 2015-20 has regard to AMP6

2. Changes from the Last Practice Note

Historically Sewage Treatment Works have treated obsolescence allowances differently to other industrial categories of property. However with the incorporation of Monsanto Allowances within 2010 settlements, it has been decided to bring this class of property more into line with its industrial counterparts. The following are changes form the last practice note.

2.1 Stage 2 – Adjusted Replacement Costs (ARC)

The appropriate allowances’ to use at this stage have been reviewed the items detailed below are changes from the 2010 scheme of valuation:

2.1.1 Civils

Allowances for civils should not exceed those set out in the civils column of the age and obsolescence tables contained in the Rating Manual section on the Contractor’s basis of valuation.

Allowances for civils should be applied to all civil items including concrete chambers, tanks, conduits and beds.

2.1.2 Site Works

Allowances for items of site works which serve the property such as yards, parking areas, landscaped areas, open storage areas, boundary fencing, underground site services and lighting should be based having regard to the following:-

1.Where the items of site works serve a particular building the allowance should follow the allowance made on the building to which they relate. 2.Where the items of site works serve the property as a whole the allowance should be based on the overall average allowance derived from the allowance made for all the buildings, civil works, plant and machinery items present on the site.

2.1.3 Stage 3 - Estimation of Cost of the Land

The value to be adopted for the land should be in accordance with advice given in the rating manual for sewage treatment works. In previous lists no allowance was made to the calculated figure, however for reval 2017 allowances for the land should be based on an overall average allowance derived from the individual allowances made at Stage 2 for the buildings, civils, and rateable items of plant and machinery situated on the site.

For further background information reference should be made to the Rating Manual Section 4 - Part 3, Part 6. and Rating manual - Section 6 - Part 3 - Section 1200 : Land Valuations for the Contractor’s Basis : Practice Note 1 : 2017

2.1.4 Stage 5 – Underworking allowances

The operation of the scheme that has been adopted for the last two valuation lists has been amended slightly to incorporate flow data provided by water authorities. The quantity of allowance remains unchanged and the rating manual has been changed to reflect the new considerations. See Rating Manual Section 6 - Part 3 - Section 900: Sewage Treatment Works paragraph 8.5.1

3. Ratepayer Discussions

There have been no central discussions with representatives for the industry that have resulted in an agreed scheme at date of publication. Consequently you are advised, in the absence of any agreement to adopt the basis outlined below.

4. Valuation Scheme

Very few sewage treatment works have ever been let in the market, and those that have will usually have been let under unusual terms. Therefore the valuation of sewage treatment works is by reference to the contractor’s basis.

The contractor’s basis of valuation should proceed in accordance with the general advice contained in Rating Manual Section 4 - Part 3 using the accepted five stages.

Reference should be made to the 2017 rating cost guide for costs to adopt at Stage 1 of the valuation.

The appropriate statutory decapitalisation rate must be adopted at stage 4.