Ofwat has launched a review of the market codes which set out the credit requirements for retailers in the new business retail market in the water sector.
At present, retailers can choose to pre-pay wholesalers for the water their customers use or they can choose to post-pay which includes providing a form of credit. This form of credit must cover the cost of supplying their customers for 50 days. If they don’t have the means to do this, wholesalers can choose to no longer work with the retailer.
Some stakeholders have asked if the current requirements are too stringent and could dissuade smaller, new entrants from competing in the market.
To ensure the market is effective, Ofwat wants to test the arrangements to ensure they are proportionate and targeted. The regulator also wants to see if there are better ways to protect customers and make sure the market is dynamic and competitive for retailers.
The review launches this week and Ofwat expects to publish initial findings and next steps by April 2018.
Ofwat Senior Director of Customers and Casework, Emma Kelso said:
“The purpose of this review is to help us understand how the current arrangements relating to credit requirements for the business retail market are working and to examine the options available to remedy any issues which arise. In particular, we are keen to understand whether the current arrangements are effectively facilitating new entrants wishing to enter the market.”
Ofwat has appointed KPMG LLP to lead, on Ofwat’s behalf, the first leg of the review – the appointment follows a competitive tender process.
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