The parent company of Northumbrian Water and Essex & Suffolk Water has set out the trading and procurement terms that will apply when other water companies and third parties trade with the utility.
Introducing the draft Trading and Procurement Code, Northumbrian Water Group said it is willing to trade with any party that either wants either to take or offer a reasonable volume of reliable, sustainable and cost-effective water resources.
Although many companies (including Northumbrian Water) already trade water, Ofwat wants to encourage greater water trading between water companies.
The water industry regulator has introduced a financial incentive to encourage companies to consider more trading. However, in order to ensure that companies trade only where it is environmentally and economically sensible to do so. In order to regulate trades to guard against abuses of market power, if a company wants to apply for the trading incentive, it needs to have a Trading and Procurement Code that has been approved by Ofwat.
Ofwat will not need to be involved in approving the individual trades that a company will undertake.
NWG already has 15 bulk supply agreements with neighbouring water companies, both for the export and import of raw and treated water – the Group is currently a net importer of water.
In the Group’s view “it is likely that, initially at least, most new water trades will be between water companies, as they respond to the water trading incentives introduced ….in the 2014 price review.”
“No intention of manipulating current trades in order to exploit the financial incentives for trading”
The Code also says that NWG is aware of Ofwat’s requirement for qualifying trades to be new trades beginning in or after July 2013, commenting:
“We can assure Ofwat and others that we have no intention of manipulating any of our current trades in order to exploit the financial incentives for trading. We would expect all of our trading partners to take a similar approach to the maintenance of existing trade agreements.”
“If we agreed a new trade, the audit report that we would prepare as part of the compliance process would include evidence to show that the trade was new, not one that had been artificially ended and restarted. “
Northumbrian Water Group’s estimated water resource position over the medium term suggests it is more likely to offer exports than seek imports . All 6 of its Water Resource Zones are estimated to have marginal or material supply demand balance surplus over the planning period to 2040.
Click here to download NWG’s Draft Trading and Procurement Code
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