Changes to the infrastructure charging structure

A development incurs infrastructure charges for the additional demand that a new connection puts on the overall capacity of the water supply and sewerage systems. For some time, the Water Services Regulation Authority, (Ofwat) has been working with water authorities on fundamental changes to the infrastructure charging structure. The changes are being introduced with the aim of creating a more sustainable, transparent water sector which can meet current and future demands.

The changes mean that from March 2025, many areas will be implementing new formulas for calculating infrastructure charges. This will have a wide-ranging impact on existing and upcoming developments.

Financial implications

Under the new rules, existing developments may see an increase in infrastructure charges if the new structure adjusts the fees retrospectively, or alternatively, introduces new levies. This could have a huge impact on project budgeting and profitability. Developers may also find that they need to invest in upgrades to meet new infrastructure standards.

Income offset, also known as rebate or AV payments which made it easier for developers to invest in new projects by lowering upfront infrastructure costs, is set to be abolished. This will lead to higher upfront costs, impacting project viability and timeframes.

Any homes not connected and handed over on or before 31st March 2025 will not qualify for this incentive.  In some areas, notably the North West and Severn Trent, this offset can be considerable.

On legacy developments still being built, plots connected after this date will not qualify. This means the utility company will in most cases have to recover these costs, which were already factored into the installation costs.

How Aptus is working with its customers

Aptus is actively encouraging developers to budget for and consider these changes. In most cases, developers have asked us to calculate the rebate based on their build programme leading up to March 2025.

On all schemes, the question is asked, given we are close to the cut off and nearly all schemes contracted today will be ongoing through March 2025.

Some developers have requested no changes and said they will budget accordingly, whilst others are taking a more cautious approach and have asked us to omit any incentive altogether, for some time.

We understand that developers will be concerned about the wide-ranging impact of the changes on existing and upcoming developments. Aptus is working in partnership with its customers to plan ahead and navigate the changes.

Contact your project design manager to discuss how the changes could impact your development.

Published on 18th October 2024