Ofwat has launched a new consultation – its fourth this month - on its guidance for assessing whether non-household customers in England and Wales are eligible to switch their water and wastewater retailer when the market opens for competition in  2017.

The water industry regulator has already issued its supplementary guidance for assessing whether customers are eligible to be supplied by a licensed water supplier (WSL) or a water supply licensee, or provided with water and/or sewerage services by a water and sewerage licensee  (WSSLs).

The supplementary guidance focuses on whether or not premises should be treated as household premises under section 17C of the Water Industry Act 1991 (WIA91) and therefore ineligible to switch supplier. This followed requests from companies operating in the market for additional clarity for some customer groups.

The draft guidance seeks to apply the general principles contained in Ofwat’s eligibility guidance to specific scenarios which were either not addressed, or not addressed in detail, in that document.

The regulator is proposing that the supplementary guidance, in terms of its guidance on household premises, will apply to both England and Wales and to both WSLs and WSSLs.

One of the main reasons for publishing the new guidance is that the introduction of the new non-household retail market under the Water Act 2014 requires companies to examine whether previously ineligible customers are now eligible.

Now a particular focus on whether premises are household premises

As the threshold requirement will no longer apply to premises being supplied by a WSSL which is using the supply system of an undertaker whose area is wholly or mainly in England, there is now a particular focus on whether the premises are household premises.

The following hierarchy of considerations applies when determining the eligibility of premises:

 1. Determine the extent of the premises.

2. Determine the principal use of the premises. In the majority of instances Ofwat said this should be sufficiently clear to allow premises to be placed within the household or non-household market.

3. Where is it not readily apparent whether the principal use of the premises is household or non-household, liability for business rates or council tax may provide a first approximation. Generally, if the premises are liable for business rates only, the site will be eligible to participate in the non-household market. If the premises are liable for council tax only, the property would generally be considered a household.

4. Where the premises are liable for neither Council Tax nor Business Rates, or where the premises are liable for both (i.e. the premises are mixed use), it is important to determine which use is the “principal” one.

“Priority in identification of eligibility and uploading of data should be guided by those sites which have the greatest potential to benefit from competition”

The consultation paper sets out the practical application of the principles across a range of alternative situations. Ofwat considers that companies can use the principles and examples to identify the appropriate eligibility of customers without the need to revert to Ofwat on a case by case basis. In terms of priority for making assessments, the paper states:

“We note that in certain circumstances, the application of the eligibility guidance may result in some very small sites becoming eligible for the market. We consider these sites should be eligible for the market, but generally, that priority in the identification of eligibility and uploading of data should be guided by those sites which have the greatest potential to benefit from competition.”

Additional scenarios set out in the consultation document include:

• University halls of residence and accommodation
• Housing associations
• Local authority housing
• Serviced apartments
• Residential properties with management companies
• Nursing homes and care homes
• Assisted living or sheltered housing
• Car parks and garages
• Animal troughs
• Treatment of allotments
• Temporary supply for developers
• Zero rated and exempt properties (council and business rates)
• Treatment of vacant property/premises

Ofwat is now seeking responses on whether respondents consider:

1. the descriptions in the examples not to be reflective of the types of issues encountered; and/or
2. there may be any inconsistency between the draft supplementary guidance and the relevant legislation; and/or
3. the proposals in the supplementary guidance are unreasonable.

If stakeholders do answer ‘yes’ to any of the questions above, Ofwat is asking  them to comment on what alternative interpretation should be made and why.

Deadline to comment on the draft supplementary guidance is Thursday 7 April 2016. 

Ofwat now also intends to update its eligibility guidance and will shortly be launching a new consultation on this.

Once the regulator has considered responses to the consultation, Ofwat plans to develop final supplementary guidance and seek approval from the Secretary of State and the Welsh Ministers before publication. In terms of timescale, the consultation paper states:

“We propose to consult on these updates to the eligibility guidance to give respondents an opportunity consider both the revised eligibility guidance alongside our supplementary guidance. We will be consulting on our revised eligibility guidance shortly. We plan to publish the final supplementary guidance, together with the updated eligibility guidance as soon as we can.”

Click here to download: Consultation on supplementary guidance: assessing whether non-household customers in England and Wales are eligible to switch their water and wastewater retailer