This site uses the UK Government AccessKeys system
|
|
What's new | Publications | Media centre | Price review | FAQs Update alerts | Consumer issues | Site map | Competition | Contact us |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Media centre
A determination published today by Ofwat highlights the difficulties facing Ofwat and new licensees in trying to bring competition into the water sector under the present rules. In August 2007 Ofwat was asked to look into a dispute between Aquavitae and Anglian Water over Anglian Water's wholesale access prices. After detailed investigation Ofwat found that the prices should be lower, reducing the amount that Anglian Water could charge. However, despite this change, the final determination clearly shows that the current Costs Principle framework, which Ofwat is required to use, is restrictive and leads to very low margins. Keith Mason, Director of Regulatory Finance and Competition, said: "This case underlines that the Costs Principle remains one of the most significant barriers to the development of effective competition in the water sector. "It requires the new entrant to bear many of the established water company's costs and limits their ability to undercut the retail costs of the water company whether or not these are inefficient." Ofwat has recommended that the Government amends the current access pricing regime by replacing the Costs Principle with a general set of criteria that will allow Ofwat the flexibility to decide on the appropriate pricing method. The Government has agreed to look at the Costs Principle as part of the wider review of competition that it announced last month. "We welcome the Government review," said Mr Mason, "and we look forward to the development of a framework that allows us as the economic regulator to facilitate and promote competition in consumers' interests in the water sector." Notes to Editors: 1. The Water Services Regulation Authority (Ofwat) is the economic regulator of water and sewerage companies in England and Wales. It exercises its powers in a way that it judges will protect the interests of consumers, promote value and safeguard future water and sewerage services by allowing efficient companies to carry out their functions properly, and finance them. 2. The Costs Principle sets the parameters for calculating water supply licensing access prices. It describes the revenue relating to certain relevant costs and returns that appointed water companies can recover from licensed water suppliers. This includes the direct costs of providing access, such as capital costs, and the expenses incurred in performing statutory functions. 3. The determination was made under section 66D(2)(b) of the Water Industry Act 1991 of the terms and conditions, specifically the wholesale charges, offered to Aquavitae. It is available on the Ofwat website, www.ofwat.gov.uk 4. Media enquiries to Ofwat Press Office on: 0121 625 1442/1496/ 1322.  | ||||||
© Crown copyright |
Disclaimer & Privacy Statement |