Water retailers can choose whether to be interim suppliers: Ofwat

Water retailers will be free to choose whether to participate in interim supply arrangements, and in which areas, Ofwat has confirmed.

The regulator said it had decided to make it voluntary for alternative retailers – which are not the default retailer in the area – to opt in as an “eligible licensee for interim supply”.

Voluntary opt-in has the advantage of affording water and sewerage licence (WSSL) holders choice, it added. “We consider that there is likely to be a commercial incentive for retailers voluntarily to participate, as an interim supply allocation could represent an efficient means of customer acquisition in certain circumstances.”

In response to its consultation on interim supply in November last year, a number of respondents considered that there should be “some level of compulsion to opt-in”, in order to mitigate the risk of there being a very limited pool of potential interim suppliers in some areas.

Customers could be exposed if the circumstances of a sole backstop interim supplier in an exit area changed, such that it no longer had sufficient capacity to accept new customers or may even be subject to a disorderly exit itself.

Ofwat said it “recognised the risk” that this purely voluntary approach may not guarantee that customers will always benefit from having access to a number of potential interim suppliers.

“We will monitor this risk after market opening and, if we have significant concerns about sustainability of the pool of interim suppliers in any area, we may reconsider this issue,” it said.

The regulator also confirmed that an opted-in licensee should be allowed to opt-out on a case-by-case basis. However, in doing so, the licensee must explain its opt-out decision.