WATER SERVICES
REGULATION AUTHORITY News Release (PN 13/08) issued by The
Government News Network on 16 May 2008
Ofwat today
published the second part of its review of competition in the
water and sewerage sectors. In it we recommend that contestable
water and sewerage markets are opened to competition where it will
benefit consumers, and we describe the work we will be doing to
enable this to happen.
Ofwat Chief Executive Regina Finn said:
"We want to achieve an efficient and innovative sector which
is able to respond to the challenges facing it, such as climate
change, rising consumer expectations and growing population in
water-scarce areas. Competition can help deliver that.
"The current scope for competition in the water and sewerage
sectors is severely limited by legislation, is confined to a small
number of business customers and has not developed successfully.
"We propose that more of the market is opened progressively,
starting with all business customers. In time households could be
able to choose their water supplier, when the market is ready and
safeguards are in place.
"Competition will drive benefits such as greater
responsiveness to customers' needs, innovative approaches to
adapting to climate change and downward pressure on costs.
"Competition can also help respond to the environmental
challenge of water scarcity, which the Government highlighted in
its water strategy. Markets could spur innovation in developing
and making better use of water resources and more water efficiency
services, supporting sustainable water abstraction.
"As markets develop, we will look for opportunities to
withdraw regulation. We will continue to robustly challenge
companies on price and service delivery until competition is
strong enough to protect consumers."
We recommend a step-by-step approach to developing markets,
allowing competition to prove itself. Early priorities are the
development of competitive retail services markets and tackling
barriers to new entry to upstream water resources markets.
Progressive vertical separation of companies, including separated
accounts and price controls, will be important in enabling
competition to develop.
The document we are publishing invites comments on our
recommendations to Government for legislative change, and
contributes to the independent Government-commissioned independent
review of competition and innovation in water markets being led by
Professor Martin Cave.
Notes to Editors:
1. The Water Services Regulation Authority (Ofwat) is the
economic regulator of water and sewerage companies in England and
Wales. It exercises its powers in a way that it judges will
protect the interests of consumers, promote value and safeguard
future water and sewerage services by allowing efficient companies
to carry out their functions properly, and finance them.
2. The current competition regime (water supply licensing) is not
working. In more than two years not one of the 2,200 eligible
business customers using 50 megalitres a year have switched
supplier. One megalitre = one million litres.
3. The Government's strategy on water, called 'Future
Water', was published in February and can be found on http://www.defra.gov.uk
4. The consultation paper 'Ofwat's review of
competition in the water and sewerage industries: Part II'
can be found on our website http://www.ofwat.gov.uk
5. We invite comments on the recommendations and proposals in
this document by 29 August 2008. Please e-mail responses to hayley.purcell@ofwat.gsi.gov.uk.
Centre City Tower
7 Hill Street
Birmingham
B5 4UA