More competition needed for UK water consumers

More competition would benefit water consumers in England and Wales, says The Water Services Regulation Authority (Ofwat), the UK's economic regulator of the water and sewerage industry.

In a consultation launched last week, Ofwat took a close look on how to improve and 'stimulate' the future of the water market including the fragmentation of large water and sewage companies.

At the end 2005, a new law was passed allowing the 2,200 largest water users to choose which company provides them with water as an incentive to persuade new suppliers to enter the market. Despite a few new entrants gaining licences to supply water, Ofwat claims that not one customer has switched.

"We believe that two significant obstacles to the present competition regime are the current approach to access pricing and the high eligibility threshold. We welcome the Government's commitment to bring forward its review of water supply licensing to ensure that it delivers more effective competition, and we will play our full part in the review," said Keith Mason, Director of Regulatory Finance and Competition at Ofwat.

Ofwat said that it was contemplating a range of improvements including reduction in the eligibility threshold to let smaller users switch water suppliers.

Keith Mason added: "Ofwat has a duty to promote competition which is in the interests of water customers. This consultation opens a substantial debate on how that can best be achieved and what Ofwat, and other parties can do to make that happen. We are looking for views to help us take this forward."

In the paper, Ofwat considers strategies such as "adopting a new access pricing system that better reflects the costs of access for new companies entering the market" and recommending a significant one-off reduction in the current eligibility threshold of 50 million litres of water a year.

The paper also suggests making major changes to the industry by separating the different parts of the water supply and waste water collection services to open them up to competition.

Ofwat has indicated December 2008 as the deadline to publish findings to improve competition in the water and sewage industries.

The complete consultation paper is available on the Ofwat website.

Dana Gornitzki



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