The Department for Environment Food and Rural Affairs (DEFRA) has said that water industry regulator Ofwat needs to work with Government to build the evidence base for extending competition to the household water retail market before Ministers make the decision on whether to proceed.
The comments come in the new draft strategic policy statement (SPS) for Ofwat put out for consultation by DEFRA which sets out the government’s strategic priorities and objectives for Ofwat’s regulation of the water sector in England.
Last year, Ofwat examined the costs and benefits of extending competition to the domestic market and identified a range of scenarios, finding potential benefits of up to £2.9 billion. However, DEFRA said further work needs to be done both to ensure that these benefits can be realised, and to understand and mitigate any impacts on vulnerable customers.
The consultation paper says Ofwat should work with the Government to build the evidence base further, in order to enable the Government to fully understand the case for extending competition to households.
Ministers will then take a decision at the end of the Parliament or early in the next one on whether or not to introduce competition in the household retail market.
DEFRA said it acknowledged the importance of addressing the issues identified in the analysis, such as high and rising levels of bad debt, and the need for greater innovation in the water sector, saying:
“Ofwat should continue to consider how it can address these issues within the current regulatory framework, including through bringing competitive pressures to bear.”
Deadline for submission of responses to the consultation is 11th April 2017 – click here to download the consultation paper