Defra: Domestic customers won’t lose out with retail competition

The Department for Environment, Food and Rural Affairs (Defra) has insisted that the introduction of competition in the non-residential water retail sector will not put household customers at a disadvantage as the Water Bill entered the committee stage the House of Lords for the first time.

During the debate last night, the Labour Lord Whitty said an amendment should be made to the Water Bill which “would ensure that there is no ambiguity and that the intention of the Bill is to introduce retail competition in the non-domestic sector, but with no disadvantage in either price or in kind to the domestic sector”.

However, Lord De Mauley, the Parliamentary Under-Secretary of Defra, argued that there were already mechanisms in place to prevent business customers’ bills being subsidised by household bills.

“We expect that household customers will benefit from the improvements and innovations that competition will foster. Water companies will be incentivised to introduce efficiencies and invest in improved customer services in order to retain and attract non-household customers. There will be positive knock-on effects. Household customers are also likely to benefit from these improvements, as our impact assessment shows,” he said

During the debate, which lasted more than five and a half hours, peers also raised concerns over how poorly performing water companies would be regulated, the financial structure of the water industry and the management and regulation of the physical water system in the UK.

Lord De Mauley also dismissed calls to legally require water companies to separate out their retail and wholesale activities.

“Forcing separation would not simply be about costs to investors, it would impact on costs to customers. If the sector becomes less attractive, the cost of capital increases, and increases of as little as 1% can lead to £20 on a bill. We must remember the need to ensure that bills remain affordable,” he said.