Ofwat closes favourable pricing for sister firms case against Wessex Water

Ofwat has closed its case taken out against Wessex Water after the company took steps to address the regulator’s concern that it was making “an inappropriately low charge for the supply of biogas to an associate company.”

The regulator said the case had implications for all water companies: in that they should all “regularly review their transfer pricing arrangements updating these, where necessary, to ensure they are and will remain compliant with their obligations – particularly in emerging and developing markets.”

Ofwat said Wessex had committed, in writing, to assure it that prices its associate company, Wessex Water Enterprises (WWE), paid Wessex Water for biogas, biosolids and other transfer prices were fair and transparent in reflecting the value of the product or service being transferred.

Other reassuring measures taken by Wessex Water, according to Ofwat, included bringing its sale and management of biosolids back in-house from April 2020 and committing to market testing.

In its PR19 determination having identified its concern about Wessex’ intra-group charges to WWE by cutting Wessex’s revenue allowance from bills by £8.5m “to ensure that customers were protected from paying more for their wastewater charges than they should.”