The Competition and Markets Authority (CMA) is consulting on draft new rules and guidance which will apply in the event of any appeals by water companies against the Final Determinations Ofwat reaches in Price Reviews.

The water sector regulator issued its Draft Determinations on the water companies’ AMP8 Business Plans in July as part of the current Price Review 2024. Ofwat is due to publish its Final Determinations on the AMP8 plans on 19 December 2024 – Ofwat however has also flagged up the possibility of extending the backstop publication date to 31 January 2025.

The Water Industry Act 1991 (the Act) allows for water companies in England and Wales to dispute a price control determination by requesting Ofwat to refer it to the Competition and Markets Authority (CMA) for redetermination.

The CMA says it has reviewed the Current Rules and decided that new rules and guidance should be adopted specifically for water redeterminations in preparation for any future appeals.

The Competition and Markets Authority is now seeking feedback on its proposals, saying that they may be “of particular interest to regulators, consumer representative bodies and businesses as well as their legal and other advisers.”

The CMA has published three draft documents as follows:

• Draft rules of procedure and guidance for water redetermination references
• Draft water redetermination reference rules
• Draft water redetermination reference guide

The CMA is required to undertake a full redetermination of Ofwat’s final determination. The Guide describes how the CMA will approach the issues raised by a redetermination reference and explains it is not limited to assessing the specific issues raised by the main parties in their Statements of Case and may itself decide the issues on which to focus.

However, the CMA may also invite views to establish if there is common ground on aspects of the Authority’s determination that do not warrant redetermination, enabling it to focus on the major areas of dispute. The CMA has a shorter timeframe for conducting its redetermination than Ofwat has for making its final determination.

The CMA can also invite third parties to inform it of any other areas it should consider as part of the redetermination reference.

The Authority is also careful to point out that its redeterminations “may not necessarily lead to an outcome for the disputing companies which is better than the disputed determination.”

The Competition watchdog says it will generally adopt a proportionate approach to the redetermination reference given the time available and scrutinise most closely the areas in the disputed determination(s) that would have the largest effect on customer prices and other outcomes, and on the disputing companies.

In particular, the CMA says it will be mindful of whether in respect to specific issues:

1. any concerns have been raised by any main or third party;
2. the CMA has identified any potential concerns, for instance in the Authority’s approach;
3. there is any impact on other parts of the redeterminations; and/or
4. there is a significant scale of impact on current and/or future customer bills and/or other outcomes, including but not limited to service quality and resilience.

The CMA also says that a disputing water company which is considering taking Ofwat to refer its final determination to the CMA is “strongly encouraged” to provide the CMA with reasonable notice in advance of making any such request.

Reasonable notice in this context would typically cover an initial contact with the CMA at the latest two weeks prior to the disputing company requesting the referral to warn the CMA of the possibility of such a reference, together with providing a high level indication of the likely arguments. Pre-reference contacts will be treated as confidential between the disputing company and the CMA.

The CMA says it will not normally conduct any hearings in public and will consider whether hearings should be held in person, virtually or on a hybrid basis. It may also conduct joint hearings with multiple disputing companies, or with one or more disputing companies and Ofwat in certain circumstances - for instance where similar topics are being discussed.

Third parties can also request a hearing - the CMA will consider any such request and the reasons for the request. In addition, of its own initiative the CMA may also invite third parties to attend any hearing.

Deadline to submit comments to the consultation is 12^th September 2024 - click here for more information on how to respond.

Click here to download Draft rules of procedure and guidance for water redetermination references

Click here to download Draft water redetermination reference rules

Click here to download Draft water redetermination reference guide