Ofwat has published new rules for the 2017-18 wholesale charges set by water and wastewater wholesalers ahead of retail market opening in April 2017 when 1.2 million business customers in England will be able to choose their supplier of water and wastewater retail services.

Providers of wholesale services in England and Wales in the new market must comply with the rules when setting their wholesale charges for 2017-18 and beyond. Wholesale services include:

• maintaining the water and wastewater pipe networks;
• managing the physical supply of water to customers’ properties;
• collecting and treating wastewater and returning it to the environment.

The rules will govern the charges that new retailers holding water supply and/or wastewater licences − including new entrants and sister companies of existing water companies − will have to pay wholesalers for the provision of bundled wholesale water and wastewater services to support retail service provision. Retail services include billing, meter reading and customer services.

Wholesale charges typically represent around 90% of the costs ultimately borne by a business customer and are key to ensuring an effective business retail market develops. The rules came into effect on 24 November and apply to charges payable in relation to any period beginning on or after 1 April 2017.

The wholesale charging rules require wholesalers to:

• publish the wholesale charges payable by a retailer for the services provided to all eligible business customers;
• publish the wholesale charges (or the methodology for calculating such charges where this cannot be done in advance) for a minimum list of services set by Ofwat;
• publish their charges at least 11 weeks before the start of the period for which the charges will be imposed (or at least 9 weeks before the start of the period for which the charges will be imposed where the wholesaler is a ‘small company’ – a small new entrant wholesaler (‘NAV’) or Cholderton and District Water Company Ltd;
• publish their charges clearly on their website with whatever additional information is necessary to make it clear what services are being covered by each charge.

Introducing the rules, Ofwat said it could update them when appropriate, including to reflect market developments and as information becomes available to both itself and to market participants.

In addition to setting the wholesale charging rules, the regulator has also set out the information that companies must provide as assurance on their wholesale charges, including a requirement that each company should publish a statement of Board assurance no later than the time of publication of its final charges. The statement must confirm that:

• the company complies with all its legal obligations relating to the wholesale charges it has set;
• the company’s Board approves of the impact assessment and handling strategies in instances where bill increases for retailers and business customers exceed 5%;
• the information is accurate and that relevant stakeholders have been consulted in a timely and effective manner; and
• where a company has issued indicative wholesale charges and there are significant changes between indicative and final wholesale charges, it has provided an explanatory statement that outlines the reason for those changes and why this was not anticipated and/or mitigated.

Each company - other than a ‘small company’ - must publish a statement of significant change if it intends to make significant changes to its primary charges three months before the publication of its final wholesale charges.

The wholesale charging rules only apply to the charges that wholesalers make to retailers for the provision of services to business customers. However, for the purposes of demonstrating compliance with the price controls determined by Ofwat in respect of wholesale activities, the water companies will be required to publish the wholesale charges for all business and residential customers in one document.

Click here to download the Wholesale Charging Rules