Half of settlement deferred to ease retailer cash flow in Covid-19 crisis

On Friday, the Code Panel recommended for implementation today two Ofwat-proposed urgent code changes to support retailers as they face extreme cash-flow issues as businesses cease to pay their bills in the Covid-19 pandemic.

• CPW093 addressed the immediate threat posed by today’s settlement run. This defers retailers’ obligations to pay a percentage of their charges to wholesalers – initially 50% but with the “or otherwise determined by Ofwat” caveat – for March, April, and May settlement. Retailers will not be regarded as defaulting trading parties as a result. Wholesalers had asked for a “clear and unambiguous” commitment from Ofwat that any liquidity they provided to the market would be recoverable, but CPW093 did not provide that assurance.

• CPW091 allows retailers to change the occupancy status of a premises that has shut or retrenched significantly to ‘vacant’ in CMOS, for the period up to 30 June (but extendable at Ofwat’s discretion). CMOS does not calculate charges against vacant sites, preventing charges becoming payable between the wholesalers and retailers where there is little hope of retailers recouping that money from closed businesses.

Meanwhile in the Scottish market, the Scottish Government, Scottish Water, WICS and the Central Market Authority have agreed that from 1 April, Scottish Water will relax pre-payment arrangements for wholesale water charges on licensed providers. Worth about £60m, this is designed to give retailers flexibility to support their customers.