The impacts of Covid-19 have been felt across the whole of the UK economy. Government and Regulators have been acting together to support businesses through this period, with Government providing substantial financial support to business, economy wide.
Working closely with the market operator, MOSL, and industry we have taken a number of steps to protect the interests of business customers in the water sector, including from systemic Retailer failure (see in particular Ofwat’s 16 April 2020 consultation on liquidity challenges and increases in bad debt, 30 April 2020 decision document, 30 July 2020 Covid-19 and the business retail market next steps decision document). Our work recognised the potential longer term risk that elevated levels of customer bad debt could materialise for Retailers as a result of steps taken to contain the spread of Covid-19. Unlike many other sectors of the economy, business Retailers are subject to price controls (for some customers), which could restrict their ability to recover some efficiently incurred bad debt costs from their customer base. In addition, measures introduced to protect business customers from disconnection, late payment fees, interest payments etc (via amendments made to the Customer Protection Code of Practice (CPCoP)) placed restrictions on the actions Retailers could take to collect outstanding amounts from some business customers.
We therefore committed to monitor the level of additional bad debt emerging in the business retail market following the introduction of Covid-19 measures and if it looks like bad debt across the market is likely to exceed 2% of turnover, we committed to provide regulatory protections for a portion (but not all) of this additional exposure.
This Call for Inputs (CFI) accordingly seeks views on our approach to assessing whether and how revisions to regulatory protections may be warranted in the business retail market in respect of risks of elevated customer bad debt resulting from the effects of the Covid-19 pandemic. We particularly seek responses from business customers and their representatives as well as Retailers and other market participants.
Where to send submissions
We welcome views on the questions detailed in Appendix 1 of this CFI by 5pm on Friday 22 January 2021.
Please submit email responses to [email protected], with the subject ‘Customer Bad Debt Call for Inputs’. Owing to the closure of the Ofwat offices we are currently unable to accept responses by post.
Responses to this CFI may be published on our website at www.ofwat.gov.uk, unless you indicate that you would like your response to remain unpublished.
On Monday 11 January, we are running a webinar for interested parties to ask questions and issues arising. Further details and registration information is available.