WICS to consult on extending retailer prepayment terms

WICS is to consult on changing the credit arrangements used in the Scottish water market to give more protection to Scottish Water.

WICS' chief executive, Alan Sutherland, (pictured) told Marketforce’s Water Market Reform conference on Monday the Commission plans to consult shortly on extending the existing prepay arrangements among other things in anticipation of “more intense competition” in the market and in light of its experience of a retailer failure in 2012. When that happened, the market’s stipulation that retailers prepay the wholesaler “did not protect Scottish Water in full, it halved the loss”; nor in the event could the failed retailer’s administrator be relied on to recoup the money lost.

Sutherland noted his approach was “at variance with what Ofwat has issued” recently on credit terms (see story). He argued counterparty credit risk was real and urged wholesalers to “think hard” about how they would manage it. Could, for example, they cope had a very small retailer taken on the BHS chain?