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Ofwat has today set out how it plans to conduct a review of household water competition.
Following an announcement from the Treasury, Ofwat has published its draft terms of reference, stating how it will conduct a review of the costs and benefits of introducing competition into the household water retail market.
The review will look at different scenarios in which this could happen, for example a ‘thin’ retail market, where market activities provide only core retail activities; or a ‘thick’ market, which includes a wider scope of activities including resource procurement and local distribution.
A ‘narrow’ market will also be considered, in which a specific sub-set or sub-sets of household customers are contestable, allowing different regions or segments of the market to open at different times; and a ‘wide’ market, in which all household customers are contestable.
Because of the constraints of the timescale, Ofwat said it has already begun its work on the review. However, it added that it would welcome stakeholder views on any possible refinements or gaps in its proposed approach that it “might take into account as the review progresses”.
Ofwat chief executive Cathryn Ross said: “Opening up choice is a decision for government. We have committed to a rigorous review that is open, transparent and evidence based.
“We will look to learn from other sectors and want to hear a wide range of views. This will be crucial in delivering a comprehensive review that takes full account of the best interests of customers and wider society.”
Ofwat will announce its initial findings in July for comment, before publishing a full review by September.
The review will not consider the potential for competition in the household retail market in Wales.
The Treasury announcement in November came as a surprise to the water industry, which has been focused on opening the market to competition for non-domestic customers in 2017 and was not expecting domestic competition to follow so swiftly.
Analysts have warned that the plans will increase business risk, hitting the earnings of incumbent water companies, and could even deter foreign investment in the water sector.
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