Ofwat has today published its final decision on a bulk pricing dispute between Anglian Water to Independent Water Networks Ltd which rules in favour of Anglian Water.

The final determination in this case is the first final decision to be made by Ofwat’s Casework Committee which was established to make certain final decisions in strategic cases. It is also the first instance in which Ofwat has used its published framework for resolving bulk pricing disputes.

In its draft forward programme launched yesterday, Ofwat said it will use its casework activity in the coming months to ensure that the opening of the non-household retail market to competition is effective and delivers benefits for customers as provided for in the Water Act 2014. The regulator will also carry out work in 2015-16 with a view to ensuring casework will support the development of water trading and abstraction reform, again as envisaged by the Water Act 2014.

The paper says Ofwat will seek to make “robust and timely decisions on individual cases”, with a continued focus on strategic cases, which will bring the most benefit to customers now and over the long term.

Today's final determination relates to prices charged by Anglian Water Services Limited to Independent Water Networks Limited for the bulk supply of potable water to and the bulk discharge of wastewater from the Priors Hall site, in Corby, Northamptonshire.

Richard Khaldi, Senior Director, Customers and Casework said:

“Casework is a key part of our toolkit. This determination will provide guidance on our approach to those involved in bulk price negotiations and thinking of coming to us for a determination. Going forward we will use our experience of this and other current determinations to inform the development of new charging rules in this area. Working closely with stakeholders, we will ensure these can be put into practice successfully and provide a fair deal.”

Under the final determination, Ofwat has concluded that Anglian Water’s relevant Large User Tariff (LUT) should remain as the price charged for the provision of bulk supply services Independent Water Networks Limited. The regulator’s determination states:

“This is because we consider that

• Anglian Water’s LUT is appropriate given the geographic nature of supply, because the infrastructure used to supply the site is broadly common and not discrete
• does not give rise to competition concerns based on our analysis, such as deterring efficient entry into the New appointments and variations (NAV) market)
• does not give rise to efficiency concerns such as inefficient use of water resources

We have also concluded that there is no robust evidence to demonstrate that the costs of providing bulk supply services to IWN in this particular case are materially different to the costs of serving a typical large user customer to warrant a different price being charged.

We made our decision following a consultation process, which included receiving input from the parties as well as industry stakeholders including other water companies and new appointees that are involved in bulk supply agreements.”

Case flags up lessons for companies and customers

Ofwat has flagged up lessons for both companies and customers to take from the case, commenting:

"Parties must provide robust evidence to support their arguments when making applications for a determination. 

This determination will help us in developing future charging rules for bulk supplies following provisions in the Water Act 2014. These rules together with the separate price controls we have introduced for appointed monopoly companies through the 2014 price review 2014 will impact our approach to making determinations in this area in the future.

Until the new charging rules are in place, we have a framework for resolving pricing disputes involving bulk supplies which we will apply to the individual facts of each case we receive. We will use our current determinations to inform how we develop new charging rules so that we can ensure that they can be put into practice successfully."