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Ofwat consults on relaxation of merger rules

Ofwat has published a consultation on a proposed new approach to water company mergers, which could reduce barriers to such deals where they are judged to be in the interests of customers.

Ofwat has published a consultation on a proposed new approach to water company mergers, which could reduce barriers to such deals where they are judged to be in the interests of customers.

Current rules mean that most water-to-water company mergers are automatically referred for an in-depth review by the Competition and Markets Authority (CMA), because of the assumption that reducing the number of water companies will hinder the regulator’s ability to compare price across the sector.

However, when it is fully enacted, the Water Act 2014 is set to change this, giving Ofwat a greater role and the CMA more discretion in the process. The regulator will be able to provide an opinion to the CMA on whether the proposed merger will affect its ability to make price comparisons and whether the customer benefits of the deal outweigh this factor. On the basis of this opinion, the CMA may decide that an in-depth review is not necessary.   

In its consultation document published today, Ofwat sets out its principles and approach to assessing mergers, including how it will assess the impact on its ability to make comparisons.

Keith Mason, Ofwat’s Senior Director of Finance and Networks, said: “We welcome the changes to the rules on water mergers in the Water Act 2014. Our increased role at an early stage in the process will provide greater certainty around potential mergers and reduce the burden on mergers which provide benefits to customers. Yet it still ensures that customers remain protected where this is not the case.”

The consultation, which is available here will be open for responses until July 10, following which Ofwat will publish its final approach in September.

Author: James Brockett,
Topic: Policy & Regulation
Tags: ofwat , consultation

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