Ofwat tries to pump up water competition
Kick-starting water competition in the water industry requires legislative changes on top of the so far unsuccessful market competition measures brought in so far, Ofwat has said.
The water regulator introduced measures that give major business water users the choice to change their water supplier in 2003, but no consumers have switched so far, prompting Ofwat to launch an internal review into market competition.
It pointed to two aspects of current legislation that prevent the measures contained in the Water Supply Licensing (WSL) regime from delivering effective competition – the Cost Principle and the threshold for eligibility.
The WSL regime allows water customers using at least 50m litres of water a year to switch suppliers – a threshold that limits the effectiveness of the measure to a very small potential market.
The Cost Principle also arrests competition as it sets a very prescriptive method for setting prices for access to companies’ networks, giving low margins.
Keith Mason, Ofwat’s director of regulatory finance and competition, said: “We take our duty to promote competition very seriously and are disappointed by the lack of progress.
“We want to see effective competition in its most appropriate form across the whole range of water company activities. This will benefit consumers and the water industry as a whole.”
The new measures will be set out in a consultation set to be launched in the summer.