On Friday, Ofwat implemented changes to the credit terms operating in the retail market that were originally proposed urgently by Castle Water back in October, in light of wholesalers’ credit metrics coming under pressure from PR19 final determinations.
The watchdog closed a loophole which would have allowed wholesalers to draw down more than they are owed from Eligible Credit Support or Alternative Eligible Credit Support posted by retailers. Furthermore, retailers whose credit support has been over-drawn by wholesalers will now only be required to provide further credit support over and above the excess drawn down.
Ofwat approved for the most part CPW079, though with clarifications to the legal drafting. This sought to relieve retailers of the obligation to provide credit support if the wholesaler had drawn down credit support in excess of the amount due. Ofwat rejected other parts of the change proposal, including a request that Ofwat deal with disputes on this credit subject rather than using the processes set out in the code.