IB 19/14 Ofwat consults on bulk pricing draft determination

Ofwat has today opened a consultation on a draft determination of a bulk pricing dispute under sections 56 of the Water Industry Act 1991.

The determination relates to the price charged by United Utilities Water (UUW) to Iggesund Paperboard (Workington) Limited (IP(W)L) for the bulk supply of non-potable water to its paperboard mill near Workington, Cumbria and the method of annual indexation applied by UUW.

After reviewing the price at which UUW supplies water to IP(W)L, and having examined not only the costs incurred by UUW in relation to that supply but also the potential costs that IP(W)L would incur if they chose to develop their own supply infrastructure, Ofwat has provisionally concluded that UUW should reduce the price that it charges IP(W)L from 14.9 p/m3 to 7.5p/m3 (at 2006/07 prices). Our draft decision also confirms that UUW’s use of the Retail Price Index to adjust the price annually to take account of inflation is appropriate.

In this case, Ofwat has again used its published framework for resolving bulk pricing disputes.

The consultation, which runs until 7 November, seeks views from interested parties on the questions set out in the draft determination and in particular, on how we have applied our framework in this case.

Notes to Editors:

 

  1. Ofwat (The Water Services Regulation Authority) is the economic regulator of the water and sewerage sectors 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. On 21 September 2010, IP(W)L wrote to Ofwat requesting that we make a determination in relation to the price per cubic meter for non-potable water being supplied to the company and the use of the Retail Price Index to adjust the price annually. Having satisfied ourselves that the parties were in fact in dispute and a negotiated position was not possible, Ofwat agreed to determine this matter using our powers under section 56 of the Water Industry Act, 1991.
  3. Ofwat has used its published framework for resolving pricing disputes involving bulk supplies in this determination.
  4. The consultation paper is available on the Ofwat website: www.ofwat.gov.uk
  5. Responses should be addressed to: ([email protected]).
  6. Media enquiries to Ofwat Press Office: Benedict Fisher 0121 644 7642 / [email protected]