This document is our consultation on our proposed approach to derogations which is set out in our ‘Draft derogations guidance’ document.
A derogation is a direction from Ofwat which relieves a licensee or appointee from compliance with certain of its obligations in the Wholesale-Retail Code (WRC).
At the moment only a small number of business customers across England and Wales can choose their water retailer and most customers must use services provided by the monopoly water companies. The UK Government is committed to opening an expanded retail market in April 2017 that will provide choice to all eligible business, charity and public sector customers (business customers) in England and Wales. A new legal and regulatory framework is being put in place to facilitate the market, and to provide the necessary market governance.
The current 50 million litre threshold will be retained and the restriction of competition to retail water supply only will continue for customers who are supplied using the supply systems of appointed companies whose areas are wholly or mainly in Wales. This reflects the different policy position of the Welsh Government.
The water sector has worked with us to develop the WRC which sets out the processes that will govern the retail market for the supply of water and wastewater services to business customers. This statutory code will govern the operational arrangements between wholesalers and retailers, the requirements wholesalers and retailers have to follow in maintaining the central register at the Market Operator and the business terms which will apply to their relationship.
As part of our duties as an economic regulator it is important that we consider proportionality when we monitor company compliance with the WRC. Given the different scale and sizes of companies within the water sector it is possible that instances will occur where certain companies will consider compliance with the obligations in the WRC to be disproportionate or where short term compliance is not possible. In these instances derogations from compliance with certain obligations can be useful.