The suggested measures include increasing the number of non-household customers who can choose their supplier, and greater flexibility in how access prices are set.

Ofwat’s proposals follow criticism from a House of Lords committee in November which said the regulator had failed to match the performance of regulators for other utilities, such as gas and telecoms, when it came to increasing competition.

Keith Mason, director of regulatory finance and competition at Ofwat, said the changes would lead to greater benefits for consumers in England and Wales and drive efficiency and innovation.

He said: “Competition in other utility sectors has led to lower bills and improved service, enabling the withdrawal of regulation where markets become effectively competitive.

“We welcome the Government’s commitment to a review of competition and we would like to see the proposals we are making in this paper and the forthcoming paper in spring 2008 be taken on board in that review.

“Government can expand the market and amend the access pricing regime, both of which will improve the prospects for the development of greater competition in this sector.”

Under Ofwat’s scheme, the current 2,200 customers eligible to change water supplier would initially be increased to include about 27,000 non-households, rising to all 1.2m non-households.

The proposals represent the first part of Ofwat’s own competition review, which has focused on making the water supply licensing regime more effective and developing greater transparency in the market.”

The second part is expected to follow in spring 2008 and will consult on proposals for wider changes to the industry.

Kate Martin

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