Ofwat consults on code changes to support retailers to act as interim suppliers

(by Karma Loveday)

Ofwat is consulting until 18 February on changing the market codes to introduce a Cost Recovery Mechanism (CRM) and Cashflow Support Tool (CST), and associated guidance, designed to strengthen the Interim Supply Arrangements. This is to protect customers when a retailer collapses or otherwise unexpectedly leaves the market.

In July 2024, the regulator decided to allow retailers to recover efficiently incurred costs where they act as interim supplier, to make volunteering for the role more appealing. After working on the designs with an industry group, Ofwat is now consulting on introducing two mechanisms to all relevant market codes: the Wholesale Retail Code, Market Arrangements Code, Interim Supply Code, Retail Exit Code and Customer Protection Code of Practice.

The CRM will enable an interim supplier to retrospectively recover efficient costs additionally incurred acting in that capacity. These costs will be recovered from all business customers on a fixed levy per supply point basis, via typical billing arrangements. Interim suppliers can make an initial application within six months of a supply event. They can then make a second true-up application after a year, but no more than two and a half years after the event.

The CST will provide additional liquidity to interim suppliers in the short term, to help support their operations, such as an expedited scale up. These retailers will be able to defer up to 60% of charges due to each relevant wholesaler for up to six months, and then repay these within a year. They will also be able to defer up to 60% of their credit support requirements for supply points acquired under the Interim Supply Arrangements.