Periodic Review of Water Price Limits 2004
(PR04)

Introduction

In 2004 the water industry’s economic regulator, Ofwat, will set the price limits which water companies can charge for the period 2005-2010. This price review process is referred to as the 2004 Periodic Review (PR04).

The price limits are set to enable water companies to deliver the services required of them – which includes allowing for capital maintenance of assets, ensuring security of supply and compliance with the requirements for environmental and drinking water quality standards.

The Drinking Water Inspectorate’s (DWI) main role is to check that water companies in England and Wales supply water that is wholesome and complies with statutory requirements. This is mainly done by means of technical audit, incident investigation and dealing with consumers. An important element of the audit process is putting in place solutions where water companies do not comply with existing standards, or will not comply with new or revised standards. This latter role links into the Periodic Review process, where DWI is responsible for identifying requirements for drinking water quality, and for agreeing specific drinking water quality programmes of work with individual water companies which are funded through the PR04 process.

The DWI’s primary objectives for PR04 are:

• To secure compliance with the 2000 (for England) and 2001 (for Wales) Water Supply (Water Quality) Regulations; and
• To facilitate the transition during the PR04 period from a regulatory driven programme of work approach to a water company determined and driven programme of work to secure and maintain long-term drinking water quality requirements.

The key drivers for drinking water quality for PR04 are:

• Completion of strategic distribution system renovation programmes,
• Improvement to water treatment where current or future standards are not being met,
• Strategic lead communication pipe replacement programmes and
• Maintaining acceptability of water to consumers.

Along-side these drivers, DWI requires water companies to prepare and implement strategies for the proactive management of their drinking water distribution systems. The aim of these Distribution Operation and Maintenance Strategies (DOMS) are to maintain the improvements gained in drinking water quality from the extensive renovation of distribution systems carried out since 1990.

DWI’s views and expectations for PR04 are outlined in a series of Information Letters.

• DWI Information Letter 13/02: The 2004 Periodic Review of Prices & AMP4 – Initial Guidance
• DWI Information Letter 14/02: The 2004 Periodic Review of Prices & AMP4 – Confirmation of Initial Guidance
• DWI Information Letter 15/02: Distribution Operation and Maintenance Strategies (DOMS) - DWI Requirements and Expectations

Initial Ministerial Guidance on PR04 matters from the Secretary of State (Defra) and the Welsh Assembly Government was recently published. The Initial Guidance is the first of three Ministerial guidance documents and sets out potential policy requirements that may affect water companies in the period 2005 – 2010.

Further information on the PR04 process:

• PR04 process and timetable
• Customer Consultation
• Company Information
• What are prices limits ?
• Useful Links
• Technical Briefing Notes

Contact us for further information on PR04 matters.