The Competition Commission’s (CC) recent findings on the appeal by Bristol Water Plc against Ofwat’s decision on the prices it charges its customers raises questions in the event of potential applications by other water companies for interim price increases between now and 2015.

The issues have been highlighted in a new paper published today on WaterBriefing by Suzanne Rab, counsel in the Antitrust, Competition and Economic Regulation practice at Hogan Lovells in London and Alex Olive, associate at the practice.

What's the appeal of a price review examines the ramifications of the increase allowed by the Competition Commission, which fell short of what Bristol Water was seeking. It also raises questions about what other applicants in a price review appeal before the CC may stand to gain by disputing the regulator’s determination.

The paper says it is interesting to note that although Ofwat met with firm opposition from across the industry during its review process, only Bristol Water challenged the regulator's final decision all the way to the CC.  According to Rab and Olive, the full ramifications of the CC's reasoning are likely to be of most interest in the medium term as water companies decide throughout the period of the current price control (2010 - 2015) whether to accept the current limits.

The paper also flags up the importance of longer term implications of price control and how regulatory capital will be allocated across different business activities as the industry embarks on the next period of regulatory development and concludes:

“The challenges that regulated companies face in terms of a growing population, scarcity of water, climate change, meeting customer expectations and an uncertain economic climate should not be underestimated.”