In a lighter-touch follow up to its 2020 Review of incumbent company support for effective markets , Ofwat has told incumbent water companies to continue “and – in some cases – step up” their efforts to support effective business retail and developer services markets.
Writing to company chief executives, Ofwat’s interim chief executive David Black praised positive efforts and achievements to date and called for further action, noting that Ofwat’s 2020 conclusion that some incumbents performed better than others “remains our view”.
Ofwat said it expected to see further support for the business retail market, “including as companies begin to prepare their business plans for PR24,” on better understanding business customer needs, particularly for “accurate and timely meter reads”. Moreover Black said “If we see companies failing to support… [B-MeX and market performance framework review] work and/or attempting to delay progress, we will call this out and take further action if appropriate.”
He also pointed to the recent investigation into Thames Water on market data quality, pointing out: “This demonstrates that we are willing to use our full range of our regulatory tools if necessary. I encourage all incumbent companies to carefully reflect on our findings, including the actions that Thames has committed to in order to improve the quality of its market data.”
On developer services, Ofwat said a number of incumbents are not meeting target service levels for self lay providers (SLPs) and new appointments and variations (NAVs). It also pointed to further improvements that are needed in charging practices including bulk charges for NAVs and the cost reflectivity of new connection charges.
Ofwat said: “While SLP (and NAV) market shares have increased, there are still some incumbent areas where they are low. We are keen to understand the reasons for this, particularly the level of competition in different segments of the developer services market and the drivers of SLP growth. As part of PR24, we will consider whether an alternative form of regulation might apply, and what further interventions might be appropriate.”
Among the positive achievements from the industry Ofwat called out relating to the business market were: progress on bilaterals and credit; the recent market governance revamp which puts customers at the heart; and the new RWG subgroup formed to work on tariff simplification. On developer services, the regulator recognised D-MeX score improvements; record numbers of NAV licence grants; bulk charging improvements for NAVs; and a growth in SLP activity, with SLPs now accounting for around 34% of all water new connections.
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