Ofwat has published its draft determinations for the PR16 price review, as part of the preparation for the opening of the business, public and charity sector retail water market in April 2017.
The price review builds on the price caps set as part of the regulator’s last price review in 2014 (PR14) and limits the prices companies can charge business customers on existing tariffs when the retail market opens for competition next year.
In submissions to the review, most companies suggested limited, cost-neutral rebalancing of their existing tariffs for business customers, with the impact on prices generally less than 1%.
Ofwat’s intention to revisit the price caps ahead of the opening of the business market was announced in PR14, to ensure they reflect the most up-to-date information on company costs.
In considering the company representations on costs, Ofwat said it has "set a high bar for evidence" and has called on a number of companies to revisit the submissions they have made.
The regulator has accepted a majority of the water companies’ proposals as the basis for the new default tariff caps. However, the regulator said that Anglian Water, Dŵr Cymru, Northumbrian Water and Thames Water, had made proposals that were not supported by evidence that was sufficiently convincing, comprehensive and/or robust.
For these companies Ofwat has retained the PR14 price caps that apply to customers using less than 5Ml -they (along with other stakeholders) can make further representations by the 28 October which Ofwat will consider in formulating the final determinations to be published on 15 December.
Cathryn Ross, Ofwat Chief Executive, said:
“This price review establishes a backstop to limit prices within existing tariffs for business customers once the market opens to competition. In a vibrant market, we will see retailers make attractive offers to win and retain customers and we will see customers voting with their feet. But it is prudent, especially in the early days of the market, to establish some safeguards to protect business customers.”
The new price controls will come into force upon the opening of the market in April 2017.
Click here to read Business retail price review 2016 (PR16): draft determinations
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