Ofwat has launched a new consultation on what happens to business customers if retailers stop supplying them in the new retail water market.
The water industry regulator has published a paper setting out its proposals for how interim supply arrangements will work when the new retail market for business customers opens for competition in April 2017.
The arrangements cover the situation where, in certain circumstances, a water or sewerage supply licensee ceases to supply its customers in the new market, for example as a result of insolvency, - referred to as the “interim supply arrangements”.
The arrangements are intended to ensure continuity of affected customers’ retail services and appropriate protections for customers and other market participants in such an event.
Ofwat is also seeking views on the draft text of the Interim Supply Code (ISC) published alongside the paper - deadline for responses is Friday 4 March.
The paper sets out Ofwat’s policy objectives for the new retail market, together with its policy conclusions on a number of key issues, including:
On whether it should be voluntary or mandatory to elect to be an eligible licensee (“opt-in”), at this stage in the development of the new market, Ofwat has decided not to introduce any form of mandatory opt-in or market-share threshold test.
Eligible licensees who are not already obliged to opt-in to the interim supply arrangements will therefore be free to choose whether they wish to opt-in, and the areas in respect of which they wish to do so. However, the regulator will monitor this after market opening and, if it has significant concerns about the sustainability of the pool of interim suppliers, it may reconsider the issue.
Licensees will also be entitled to exercise their voluntary opt-in right at any time, including when the licensee considers itself sufficiently established to provide an interim supply capability.
Ofwat has also decided to shorten the licence revocation timetable to provide for revocation of a WSSL licence with not less than 24 hours’ notice as a precautionary measure where there has been an insolvency event. This is in order to ensure that customers and other industry participants are appropriately protected in situations where the interim supply arrangements have been invoked.
With regard to provision of information about affected customers, the paper says Ofwat will always provide - or procure the provision of) basic aggregated information on the affected customer base. At a minimum, potential interim suppliers will need to know how many customers would need to be supplied on interim supply schemes of terms and conditions in each region. However, the regulator expects that more granular information on affected customers could be useful, as long as it could be rapidly and robustly generated, including from information within the Market Operator’s systems.
On opt-out, eligible licensees will generally be permitted to opt-out by area and/or service category although some conditions will be placed on this. Eligible licensees will not be able to opt-out on any more granular basis, such as by customer class. In Ofwat's view this would increase potential for complexity, delay, and reduced interim supply options for some classes of customer.
Commenting on the Interim Supply Code, the paper says a simple form of market-based allocation mechanism will be introduced for market opening in April 2017, and the draft ISC has been developed on this basis. Ofwat says a simple form of market-based allocation has the potential to deliver better outcomes for customers, is deliverable for market opening and can be designed so as not to introduce significant additional complexity or time into the overall interim supply process.
The regulator will assess the need for any market-based allocation process on a case-by-case basis and intends (in the first instance at least) to seek simple price-only offers where it chooses to use market-based allocation. Initially at least, undertakers will not be permitted to participate in any market-based allocation process.
Ofwat has also decided not to include a power in the ISC to direct all relevant retailers to use comparable terms and conditions for interim supply in each region if the differences in their individual schemes were otherwise likely to risk significant customer prejudice i.e. “postcode lotteries”, at least initially.
Click here to download Interim supply arrangements: policy conclusions and consultation on draft Interim Supply Code
Click here to download Interim Supply Code- Draft for Consultation
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