Ofwat is planning for a seamless transition for the opening of the retail market to competition in April 2017, according to the latest Open Water update.
The Open Water programme is preparing for the transition from the current Water Supply Licensing (WSL) retail market arrangements to the opening of the expanded business retail market in April 2017.
As part of the transition, Ofwat needs to either stop or revoke some of the current arrangements, and ‘switch on’ or set up the elements of the new market framework. The update says this requires careful planning and sequencing of the relevant activities to provide a seamless transition for customers and market participants.
In particular, Ofwat needs to:
- Give effect to the new legal and regulatory framework - for example, the new retail licences - Water Supply and Sewerage Licences (WSSLs) and various rules - the market codes.
- Remove and/or revoke the current market arrangements that are no longer required, including existing retail Water Supply Licences (WSLs) and current switching processes
- Establish the bodies that will become part of the market governance framework – the Market Operator and Panel
According to Ofwat, the critical aspect of the transition planning is deciding when the various elements of the market framework should take effect i.e. when new arrangements become operational and/or obligations become binding.
The update says it would be better to give effect to as much of the market framework as possible at market opening, rather than turning on some parts of the framework ahead of market opening. This will provide greater certainty for market participants, and reduces the risk of unintended consequences from switching on some elements ahead of market opening.
Ofwat is planning for the appointment of Market Operator Services Ltd, the company set up by the existing water companies, as the Market Operator (MO) to take place ahead of market opening. The MO will act on behalf of all market participants to administer the systems, processes and interfaces that will enable registration, customer switching and settlement between wholesalers and retailers to take place.
The MO will be appointed through a collective decision by companies holding an Instrument of Appointment (IoA) – the appointed companies and licensed retailers holding a new WSSL.
Prospective retailers who want to be involved in the process for appointing MOSL as the MO, will need to either have a WSSL, or have submitted a trading application to MOSL and an application for a WSSL to Ofwat by the end of November 2016. This includes both new entrant retailers and WSSL retailers that may be affiliated with an appointed company.
The appointment would then be formalised in March 2017, ahead of the market opening, with MOSL then taking on the duties of the MO from April 2017 when the market opens.
The update also sets out the timetable for setting up the enduring Panel in time for market opening in April 2017, including key deadlines for nominations to the role of Panel Member.
Panel members will be selected at a Panel Nomination meeting scheduled to take place in January 2017 when the meeting will elect members to the following positions:
- Three associated retailer panel members (selected from either the retail businesses of appointed companies, or affiliated WSSLs)
- Three un-associated retailer panel members (selected from WSSLs that are not affiliated to an appointed company)
- Three wholesaler panel members (selected from the wholesale businesses of appointed companies)
The Panel will also comprise the Panel Chairperson and three independent panel members, appointed by the Chair.
Ofwat intends to use a statutory transition scheme to revoke the existing WSLs, and is currently consulting on its proposals for the scheme - deadline for responses is 9 September 2016.
The regulator is also separately consulting on the proposed new arrangements for the introductions of water under the current combined supply licences - deadline for responses is 8 September 2016. Ofwat plans to consult on a number of other related issues in October.
Click here to download Open Water programme update - retail market transition arrangements
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