MOSL proposes payment breaks and waiving financial penalties

MOSL, the market operator for the non-domestic water sector, has proposed waiving charges to help retailers cope with impact of coronavirus.

To alleviate financial pressures MOSL and Ofwat recommended a series of code changes to “pain share” between customers, retailers and wholesalers during the coronavirus outbreak.

In a joint open letter from Sarah McMath, head of MOSL and Emma Kelso, head of markets and enforcement at Ofwat, said the whole water sector must step up and do “whatever is necessary” to keep services running.

They said the disruption to businesses and non-household customers presented an unprecedented challenge and acknowledged that “some very significant issues” needed addressing urgently.

MOSL set out proposals to protect customers, waive current performance charges and explore changes that could offer relief for late payments.

Following discussions with the department for environment, food & rural affairs (Defra) and Ofwat, MOSL said it wanted to see the performance charges collected in 2019/20 used for re-distribution among trading parties, not used for other projects.

The initiatives proposed at a meeting held on 18 March will be taken forward to address issues around the current uncertainty with the intention to host an extraordinary panel meeting to expediate these changes. MOSL with Ofwat will set up an engagement group to better understand the changes as are needed.

The first step of the proposals included:

• Waive performance charges with effect from 1 March 2020.
• Ensure all the performance charges collected during 2019/20 are available for re-distribution to trading parties (rather than used for market improvement projects).
• Enable retailers to offset 2020/21 Market Operator (MO) charges against prior year performance charges (based on the specific amount that would otherwise be redistributed to them in September 2021) with effect from April 2020.
• Improve settlement estimation to reflect reduced water consumption from April 2020.
• Develop potential changes to provide relief on late payment of settlement charges to be progressed over the next two to three weeks

Further actions outlined by McMath and Kelso included removing penalties in instances that meters cannot safely be read. They said meter reading, which is certain to decrease to minimise non-essential contact, could continue where social distancing was adhered to.

Changing codes to mark premises as “vacant” where customers have been temporarily forced to close or allowing delayed payment could ease cash flow problems for retailers during closures or if demand is lower.

The open letter from Kelso and McMath noted the consequential impact on retailers could delay collection of funds form customers would have a knock-on effect of retailers’ ability to pay wholesalers.

While limiting the financial risk, it said there will be an element of “pain-sharing” between all parties and encouraged retailers and wholesalers to work together to develop payment terms.

Any code changes that arise will be explored by Ofwat for an urgent panel meeting and both parties will engage with trading parties on market matters.