Water industry regulator Ofwat has issued an invitation to tender for consultants to assist it in investigating how the market for New Appointments and Variations (NAVs) is working.

The NAV system allows developers and large users to choose their monopoly supplier of water and/or wastewater services. It was introduced to provide a mechanism to enable new entry into the sector and to allow those already present to expand into other geographical areas.

However, Ofwat said that while NAV applications have increased in recent years, the scale of the market is still modest. To date, only eight new appointees have entered the market and 68 NAV sites have been granted – mainly for new residential and mixed use developments.

Although the regulator has made a number of changes to the NAV policies and processes in recent years to improve the effectiveness of the market, stakeholders are continuing to express concerns about how the market is operating.

Ofwat is therefore planning to use its powers under section 27 of the Water Industry Act 1991 to review the market, enabling it to investigate any issues in the market. It will also consider the extent to which current initiatives and policy developments could help to address these issues or to identify other areas where it may be appropriate to intervene using the full range of regulatory tools, including concurrent competition law powers.

Ofwat is anticipating that the majority of the information gathering and analysis will be completed during the first quarter of 2017, commenting:

“We will be engaging extensively with stakeholders to ensure that the investigation is as comprehensive and robust as possible.”

The tender process has been let under the Ofgem Framework Agreement for Economic, Financial and Related Consultancy Services, between the Gas and Electricity Markets.