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Ofwat: Lack of support for markets 'unacceptable'

Ofwat chief executive Rachel Fletcher has challenged water companies to do more to support the development of markets, including business retail and developer services.

In a letter sent to the chief executives of the incumbent water companies operating wholly or mainly in England, Fletcher said well-functioning markets can deliver better outcomes for current and future customers through lower prices, better quality services and improved choice.

She also suggested that they might bring new approaches to help the industry meet its major challenges, including population growth, climate change, affordability and changing customer expectations.

However, she said that although there were some instances of companies taking "positive and pragmatic action to support the development of markets", that was far from widespread.

Fletcher said: "We see numerous, persistent examples of incumbent water companies failing to support the development of effective markets – in particular the markets for business retail and developer services.

"The overall level of incumbent water company support for markets is unacceptable. We expect to see a significant improvement over the coming months.

"In some cases, incumbent water companies are giving insufficient thought to the potential impact that their actions (or inaction) can have on the effective functioning of markets for customers. In other cases, we see companies actively opposing or delaying initiatives that are aimed at improving these markets."

Fletcher said there would need to be improvement in several areas, including:

  • Effective engagement in and support for initiatives aimed at driving improvements to the business retail market
  • Supporting a vibrant competitive market for developer services
  • Effective support for the development of new markets

She asked all the companies to respond to the letter by the end of October to set out the efforts they have made, with the regulator planning to monitor the situation over the coming months and review progress in the autumn.

Fletcher added: "If we do not see a significant improvement by the autumn, we will increase the pace and extent of pressure we exert on incumbent water companies, considering the full range of regulatory tools we have at our disposal. This includes our Competition Act and sectoral enforcement powers where appropriate.

"For example, in the business retail market we could propose changes to the governance process for code modifications if we think the current process is being hampered by companies prioritising vested interests over the effective functioning of the market.

"There are also formal and informal steps we could take to highlight and reward (penalise) good (poor) performance publicly. We are committed to using our powers and influence to drive better outcomes for customers through the markets we have in the sector.

"However, the best outcomes for customers and society will be achieved by the sector working collaboratively to develop solutions. The sector – including incumbent water companies, retailers, third parties and customers, including their representatives – has more detailed knowledge, insight and resource available to it than we do as the regulator.

"However, if it becomes clear the sector cannot or will not deliver improvements to these markets, then we will need to take further steps."

Author: Robin Hackett, editor, WWT
Topic: Policy & Regulation
Tags: ofwat , retail , developer services

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