London, U.K. --- (METERING.COM) --- July 17, 2007 - U.K. water and sewerage regulator Ofwat has launched a consultation on options to boost competition in these sectors, following its recent finding that sectoral competition was not working satisfactorily.
The key area of focus is the water supply licensing (WSL) regime, under which customers who use at least 50 Ml of water a year – approximately 2,200 businesses – may switch their water supplier. Ofwat proposes that there should be a significant once-off reduction in this eligibility threshold to a level yet to be determined. For example reducing the threshold to 20 Ml per year would increase the number of eligible customers to 5,700 and a threshold of 0 would increase the number to almost 1.25 million customers.
Ofwat also proposes that there should be a new access pricing system that better reflects the costs of access for new companies entering the market. Ofwat suggests that the principles that should apply to any access pricing regime be set out in legislation and that the regulator then should be required to develop the appropriate access pricing methodology in line with them.
The paper also reviews a number of other issues, including an unbundling of the water supply and waste water services, and the extension of competition to residential customers. However, there is limited comment from householders on whether they wish to see competition in water supply and there is no research into customers' views. Moreover a competitive market for household customers would require consumption to be properly measured, but currently only an average 30% of customers are metered. The development of household competition could progress in parallel with greater meter penetration.
“We welcome the government's commitment to bring forward its review of water supply licensing to ensure that it delivers more effective competition,” said Keith Mason, director of Regulatory Finance and Competition at Ofwat. “This consultation opens a substantial debate on how that can best be achieved.”