Ofwat gives first sight of texts for changes in instruments of appointment

Water companies have until 1 July to comment on the latest drafting of a series of changes Ofwat has proposed to monopoly and inset appointees’ Instruments of Appointment to help establish the business retail market.

There is little in the way of policy change in its updated proposals, published last week, which follow consultation in May and subsequent workshops. But the regulator has tweaked its drafting in response to comments and shared for the first time draft text for some of the proposed changes that were not included in the earlier consultation.

Three new conditions are proposed:

[if !supportLists]• [endif]Market Arrangements Code condition: this is needed because the code is not statutory. Respondents agreed in principle but requested a more streamlined drafting. Ofwat said it intended to “revisit this as part of our separate project on simplifying IoAs, once the market governance arrangements are embedded”.

[if !supportLists]• [endif]Stapling condition: this will require appointees with both wholesale and retail businesses to comply with the provisions of the Wholesale Retail Code, which governs behaviour and interactions in the market. Ofwat has amended its drafting.

[if !supportLists]• [endif]Customer protection condition: this requires compliance with the Customer Protection Code of Practice. Respondents agreed with this in principle, although one queried proportionality for those appointees wholly or mainly in Wales. Ofwat has amended the draft condition to be clear that it only applies to eligible customers, in response to comments about proportionality.

In addition, Ofwat has proposed amendments to a number of existing conditions. Among other things, these aim to:

[if !supportLists]• [endif]Remove obligations relating to the current arrangements for the existing Water Supply Licensing regime that will no longer be required after April 2017.

[if !supportLists]• [endif]Remove duplication and potential inconsistencies between old and new arrangements.

[if !supportLists]• [endif]Introduce a new requirement for a separate Certificate of Adequacy for all appointees’ non-household retail businesses, so that all appointees face similar obligations to licensed retailers.

[if !supportLists]• [endif]Extend the obligation on wholesalers to make drought payments to all affected business customers, regardless of whether they are customers of the appointee’s own retail business or customers of a WSSL retailer. WSSL retailers would be required to pass it on to the customer in accordance with WRC.

The proposed changes follow Ofwat’s implementation of priority licence amendments, notably to introduce a market readiness condition and to remove the in-area trading ban.