Ofwat has announced that it has launched a new investigation into whether Thames Water is contravening obligations in its Licence and the Wholesale Retail Code.

The water sector regulator is investigating whether certain of the data about customers that Thames Water made available to retailers at the time of the opening of the business retail market in April 2017 was accurate.

Ofwat is also considering whether Thames Water had in place - and has - appropriate management resources and systems of planning and internal control to ensure that it is able to carry out its regulated activities.

Specifically the regulator is considering whether Thames Water has breached and/or is in breach of:

• Condition R2 (as was) of its Licence, by failing to ensure that the data that it collected and uploaded into the business retail market systems (CMOS) ahead of market opening was sufficiently accurate to enable the effective functioning of the business retail market;
• the requirements of the Market Terms of the Wholesale Retail Code, by failing to maintain accurate data and correct known data errors within CMOS; and
• Condition P (previously Condition F) of its Licence, by failing to ensure that it has in place adequate management resources and systems of planning and internal control to enable it to carry out its regulated activities.

The issues considered by the new investigation had previously formed part of the regulator’s Competition Act 1998 (CA98) investigation into the water company. However, Ofwat said:

“We no longer consider that the CA98 is the most appropriate tool to investigate and address these issues.”

The regulator opened an investigation in June 2019 into allegations that Thames Water Utilities Limited had contravened the prohibition in Chapter II of the Competition Act 1998 (“CA98”) by abusing a dominant position. The allegations related to:

• the approach that Thames Water had taken when installing digital smart meters and the impact that this has had on providers of data logging services and their customers
• the accuracy of the data about customers that Thames Water made available to retailers at the time of the opening of the business retail market
• the fairness of certain contractual credit terms that Thames Water applies to retailers

In June 2020 Ofwat concluded that the CA98 was no longer the most appropriate tool to use in relation to the allegation about contractual credit terms and that the issue could be more effectively considered using powers under of the Water Industry Act 1991 in relation to compliance with the Wholesale Retail Code. It therefore split this out into a separate investigation.

In November 2020 the regulator also decided that the CA98 is no longer the most appropriate tool for it to consider and address the concerns identified relating to the data accuracy issue, similarly concluding that the issue could be “more completely and effectively addressed using powers under sections 18-22A, 66DA and 117F of the Water Industry Act relating to compliance with Thames Water’s Licence and the Wholesale Retail Code.”

This has now also been split out into a separate investigation.

If Ofwat concludes that as a result of its analysis that Thames Water is breaching the requirements of its Licence and that the breach is not trivial, it has a duty to issue an enforcement order requiring it the company to take whatever steps are necessary to end its breach.

In addition, if the regulator is satisfied that Thames Water has contravened or is contravening its Licence, it may also impose a financial penalty.