Bristol Water to separate business units amid competition probe

Bristol Water has pre-empted the conclusion of an Ofwat probe into anti-competitive behaviour against self-lay organisations (SLOs), offering the regulator commitments to restructure its downstream developer services functions.

Ofwat said on Thursday that the changes proposed by Bristol Water address the complaints raised in early 2013 of anti-competitive behaviour, adding that it has opened a consultation on whether to accept the plans as binding.

“Bristol Water has offered to make changes to both its structure and processes in response to the specific competition concerns identified by Ofwat in this case,” the regulator said in a statement.

“This includes a clearer separation of Bristol Water’s downstream developer services functions, which operate in a contestable market, from its non-contestable upstream services,” it added.

A spokesman for Bristol Water declined to give further details of its business unit separation while the consultation is ongoing.

Bristol Water was accused in February 2013 of using its dominant position to harm competition in providing water infrastructure for new developments, making it difficult for SLOs to operate in Bristol Water’s area.

The company was found by Ofwat to have discriminated in the prices charged for its ‘non-contestable’ services which can only be offered by the monopoly water company. The company charged SLOs significantly more than it charged its own developer services function to provide the same services relating to new connections infrastructure.  

SLOs are able to compete with water companies to lay certain water infrastructure but always need to commission some non-contestable services in order to provide its ‘contestable’ services.

Lobby Group Fair Water Connections lodged a complaint early last year saying that for one development, Bristol Water’s fees meant that using an SLO would cost £40,000 more than getting the water company to do the work.

“[T]he case raises issues of strategic significance for the industry, given that services for new water connections infrastructure is currently one of only a few areas of competition in the water and sewerage industry,” Ofwat said.

At the time of the complaints Bristol Water said it had acted lawfully and considered its charging structure fair.

Ofwat welcomed the new commitments, saying they would address the concerns “in a timely and effective manner”, and bring earlier benefits for consumers than by continuing the investigation until an infringement decision is reached.

The regulator’s consultation on whether to accept Bristol Water’s commitments will last eight weeks until 18 July 2014.