Ofwat backs tariff harmonisation and rejects any conflict with wholesale charging rules

Ofwat has rebuffed the argument from some wholesalers that harmonising wholesale charges for business customers could conflict with wholesale charging rules and expose them to a legal challenge.

In an open letter, business retail market director Shaun Kent said: “Our view is that Ofwat's wholesale charging rules and wholesalers' licence obligations do not undermine the objectives of tariff simplification and harmonisation for metered volumetric wholesale charges.”

The issue stems from work undertaken by the Retailer Wholesaler Group’s (RWG) Tariff Simplification subgroup. This identified a range of benefits for customers and the market of simplifying and harmonising thresholds for volumetric charges, and recommended wholesalers adopt changes using Best Practice Guidelines.

However, some wholesalers have argued that the Best Practice Guidelines conflict with the principle of cost reflectivity set out in wholesale charging rules, and have said that the latter must take priority.

Kent reiterated Ofwat’s support for the RWG work and said: "We do not consider either our wholesale charging rules or Licence Condition E to prevent or prohibit wholesalers from pursuing tariff simplification or harmonisation relating to consumption bands for metered wholesale tariffs.” He said the charging rules cater for flexibility.