WRC and MAC derogations guidance expected "shortly"

Ofwat is set to publish its final derogations guidance for the Wholesale Retail Code (WRC) and issue the electronic derogations submission form following a seven-day consultation on two outstanding issues.

The regulator said it was “shortly expecting” to issue the final forms of the WRC and Market Arrangements Code (MAC) which will come into effect on market opening.

In its response document following the consulate Ofwat reported that its proposed restructuring of the WRC and MAC had not caused any additional issues.

One respondent supported Ofwat’s concern that schedule 4 to the WRC – derogations that apply to single licencee or appointee for the period and under the conditions approved by Ofwat – may become unwieldy. The same respondent said there should be a review to assess the impact and implementation of derogations to consider whether an alternative to the proposed format of Schedule 8 may be required.

All respondents agreed with the proposed approach to derogations within schedule 8 of the MAC. Two respondents said a review of schedule 8 derogations was advisable in early 2018 when the market will be better understood and market operation feeds through into code changes.

“A review of derogations could provide useful feedback on how to improve the WRC. As part of the consultation we stated that we intend to monitor derogation requests and their implementation where granted, and if the volume or nature of the derogations were to become an issue, we would consider another mechanism to implement such derogations,” said Ofwat.

Other recommendations included:

  • derogations should be tested to ensure that they have no material impact on a level playing field.; and

  • avoiding, if possible, adverse impacts of derogations on customer service or protection.

Ofwat said those had have been” built into the derogations application process,” and added: “We believe there are sufficient checks and balances in place to ensure the concerns above are considered.

There was a call for ongoing monitoring of derogations which are subject to triggers to ensure that a derogation terminates when the trigger is reached.