IB04/15: Ofwat accepts commitments from Bristol Water

Ofwat has published its final decision to accept binding commitments from Bristol Water under the Competition Act 1998.

In March 2013, in response to two separate complaints, Ofwat launched a formal investigation into the price and non-price terms Bristol Water applied when providing services to self-lay organisations. These related to the services provided by Bristol Water to enable the provision of new water connections for new development sites, either by itself or by self-lay organisations (SLOs). The complainants alleged that Bristol Water had used its dominant position to harm competition in the contestable market of providing new water connections, making it difficult for SLOs to operate in Bristol Water’s area. Effective competition can deliver benefits for customers, offering choice and acting as a driver for more customer-focused, efficient and innovative services.

Last summer Ofwat consulted on its intention to accept binding commitments from Bristol Water. Bristol Water offered to make changes to both its structure and processes in response to the specific competition concerns identified by Ofwat. This includes a clearer separation of Bristol Water’s downstream developer services functions, which operate in a contestable market, from its non-contestable upstream services.

Following consultation, Ofwat has decided that the commitments offered by Bristol Water address the competition concerns identified. The commitments will now be binding and enforceable under the Competition Act. This decision means Ofwat has now closed this investigation with no decision made on whether or not Bristol Water infringed the Competition Act.

Ofwat considers that this case raises issues of strategic significance for the sector, given that the market for new water connections is currently one of only a few areas of competition in the water and sewerage sector. The level playing field and competition law compliance issues the case raises are relevant to the sector as a whole.

Richard Khaldi, Senior Director, Customers and Casework stated:

“Our decision addresses the specific concerns referred to us by two of Bristol’s SLO customers. These commitments will help ensure an effective and fair market, which is good news for customers and the local economy.

“It also raises big issues for the whole sector. All companies need to understand who the customers of each of their services are, and to make sure they are meeting their obligations to ensure a fair, effective market. This can be a particular issue when a company is delivering both contestable and non-contestable services alongside each other. It will also become even more relevant as competition increases as a result of the Water Act 2014.”

Notes to Editors

 

  1. Ofwat (The Water Services Regulation Authority) is the economic regulator of the water and wastewater sector 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 wastewater services by allowing efficient companies to carry out their functions properly, and finance them.
  2. Ofwat has concurrent powers with the Competition and Market Authority (CMA) to investigate potential breaches of competition law. Specifically Ofwat can consider infringements of the prohibitions in Chapters I and II of the Competition Act 1998 (the CA98) relating to “commercial activities connected with the supply of water or securing a supply of water or with the provision or securing of sewerage services”. Ofwat also has a primary statutory duty under the Water Industry Act 1991 to carry out many of its powers and duties in a manner Ofwat considers is best calculated to, amongst other things, protect the interests of consumers, wherever appropriate by promoting competition.
  3. Following the Water Act 2003, parties other than appointed water companies can provide water mains and service connections. Effective competition can deliver a range of benefits for consumers, acting as a driver for more customer-focused, efficient and innovative services for consumers. Effective competition in the market of new connections infrastructure, for example through SLOs, should both deliver these benefits to developer customers and contribute to wider economic growth by better enabling developers to bring forward development schemes.
  4. The Water Act 2014 will bring significant reforms to the water and wastewater sector. Amongst other measures it will enable all non-household customers in England to switch their water and wastewater retailer; make it easier for water companies to trade water; and allow businesses to provide new sources of water or wastewater treatment services.
  5. This is the second time Ofwat has accepted commitments under the Competition Act 1998, having accepted commitments from Severn Trent plc in January 2013.
  6. Media enquiries to Ofwat Press Office: Benedict Fisher on 0121 644 7642/7616.