Ofwat has published draft guidance for its bioresources bid assessment framework – the regulator has launched a consultation inviting comments on the proposed framework.

Launching the consultation, Ofwat said the introduction of bid assessment frameworks would complement the existing market structure and help to ensure that companies procure bioresources services in a way that is transparent and promotes the market.

Ofwat comments in the guidance:

“With the right conditions, bioresources activities could help to create greater economic and environmental value through technological changes, economies of scale, inter-company optimisation, and co-digestion of sludge with other organic waste (e.g. food waste from kerbside collection).”

The guidance would apply to the eleven largest companies that hold appointments as both a water undertaker and a sewerage undertaker under the Water Industry Act 1991.

Regulation of the bioresources market is designed to facilitate market interactions between the incumbent water and sewerage companies (WaSCs ) and other firms. One form of market interaction is by other WaSCs or third parties bidding to provide bioresources services to WaSCs.

Ofwat is proposing that companies implement bid assessment frameworks setting out in detail how they would assess bids for bioresources activities.

The companies will be expected to use the finalised guidance when developing their bid assessment frameworks.

Bioresources activities comprise around £3bn (6%) of companies’ allowed revenue for the 2020-25 period. The annual cost to customers can vary significantly between companies’ areas - ranging from as low as around £13 to over £32 for a typical household customer.

During the 2019 Price Review Ofwat introduced a separate price control for bioresources activities aimed at enabling targeted regulation of bioresources activities, revealing improved information and promoting the bioresources market.

The regulator’s recent review of the bioresources market found that there are a number of barriers to the full development of the market. Ofwat’s second bioresources market monitoring report, published alongside the new draft document, provides further evidence that the market is operating below its full potential.

Deadline to submit comments on the consultation is 5pm 9th January 2022.

Click here to download the draft guidance consultation paper.

Click here to access the second market monitoring report