PN 29/22 Ofwat consults on changes to business retail price caps

2 Sep 2022 01:53 PM

Ofwat is opening a six-week consultation on proposed changes to the retail price caps that apply to smaller business customers (consuming less than 0.5Ml per year) who have not engaged in the market. The proposals only affect the business retail market and do not affect household customers.

When Ofwat last reviewed these price caps in 2018/19 it committed to another review in 2-3 years’ time.

The new proposals will simplify the price caps applying to smaller business customers by moving from the existing model of price caps varying on a regional basis, to an England-wide national price cap. This will lead to price caps in some regions of England increasing, whilst in other regions price caps will decrease. On average, across all regions in England, the changes that Ofwat propose will lead to final bills for business customers on a dual (water and wastewater) metered tariff increasing by around 0.1%, before inflation.

To help manage the impact on both retailers and business customers, Ofwat proposes to set glidepaths that aim to limit annual movements in bills (upwards or downwards) to around 5%, before inflation.

Georgina Mills, Business Retail Market Director at Ofwat recently said:

“This is the first time we have done a thorough review of retail costs to serve smaller business customers. Competition is working less well for smaller business customers, so our proposals aim to protect these customers whilst supporting a sustainable market where efficient retailers can earn a fair return.”

The consultation will be open for responses until 5pm Friday 14th October 2022.

Notes to Editors:

• From April 2017, with market opening, around 1.2 million business customers in England became eligible to choose their Retailer. In Wales, only customers with annual consumption exceeding 50Ml are eligible.  Price caps apply only to customers with annual consumption less than 50Ml, so our proposals here are relevant only to business customers in England.
• Note our proposals here do not affect the charges levied by the incumbent water companies (such as Thames Water).
• Ofwat has previously consulted on its proposed approach to reviewing the retail price caps that apply to business customers. The proposals published recently (01 September 2022) reflect feedback received to this previous consultation.
• In February 2022, Ofwat confirmed that business retail price caps would increase by 0.49% in 2022-23 and 2023-24 to reflect higher levels of bad debt resulting from the Covid-19 pandemic. This temporary uplift has not been reflected in the proposed price caps presented above.