Ofwat minded to extend C-19 business retail liquidity support and cap bad debt

Ofwat is consulting until Tuesday 21 April on further measures to prop up the business retail market during the Covid-19 pandemic, and how to mutualise the bad debt arising.

In a paper published on Thursday, the regulator said it was minded to extend the period in which wholesalers are required to provide liquidity support to retailers (through relieving them of the need to pay the full amount of wholesale bills due) until the end of July.

The plan is to increase the minimum retailers pay wholesalers from 50% (under the interim solution currently in place) to 70%, or a proportion equivalent to the invoices they have received from their own customers, whichever is the higher. Wholesalers will be able to charge interest on deferred payments.

The regulator said it was also =minded to introduce a cap on retailers’ bad debt exposure of 2% of annual turnover, potentially with some or all debt above the cap recovered from non household customers over time.

And it said it was seeking more information on whether there is a need to introduce a cap on wholesalers’ exposure from retailers exiting the market, and if so at what percentage of annual non household turnover. Ofwat said should this option be selected, it would also consider whether to recover bad debt above the cap from each wholesalers’ non household customers or across all non household customers.

Ofwat intends to make decisions on liquidity and bad debt before the end of April.