Investigation into whether Thames Water is contravening the Competition Act 1998

 

Summary of our investigation

On 21 June 2019, we opened an investigation into allegations that Thames Water Utilities Limited was contravening the prohibition in Chapter II of the Competition Act 1998 (“CA98”) by abusing a dominant position. The allegations related to:

  • the approach that Thames Water took when installing digital smart meters and the impact that this had on providers of data logging services and their business customers.
  • the accuracy of the data about customers that Thames Water made available to retailers at the time of the opening of the business retail market.
  • the fairness of certain contractual credit terms that Thames Water was applying to retailers.

As part of our analysis we kept under review which of our regulatory tools were most appropriate to each of the issues being considered.

In June 2020 we concluded that the CA98 was no longer the most appropriate tool to use in relation to the allegation about contractual credit terms and that the issue could be more effectively considered using our powers under sections 66DA and 117F of the Water Industry Act 1991 in relation to compliance with the Wholesale Retail Code. We therefore split this aspect of the complaint out into a separate investigation.

In November 2020 we decided that the CA98 was no longer the most appropriate tool for us to consider and address the concerns identified relating to the data accuracy issue. We considered that the issue could be more completely and effectively addressed using our powers under sections 18-22A, 66DA and 117F of the Water Industry Act, relating to compliance with Thames Water’s Licence and the Wholesale Retail Code. We therefore split this out into a separate investigation.

CA98 Commitments

We continued to progress the remaining strand of our investigation, concerning Thames Water’s approach to installing digital meters, under the CA98.

We held a number of meetings with Thames Water to discuss our outstanding competition concerns. Following these discussions, Thames Water decided to offer us formal commitments under the CA98, for the purposes of addressing our competition concerns in this investigation.

Specifically, the commitments sought to address our concerns that, as a result of the approach Thames Water chose for rolling out its smart metering programme:

  • retailers and third-party service providers were unable to directly access water usage data from the smart meters; and
  • Thames Water had not, as an alternative to that direct access, provided access to the water usage data gathered via the new smart meters on fair, reasonable and non-discriminatory terms.

The commitments also sought to address our concerns that Thames Water failed to have sufficient regard to the impact of its operational business decisions as a monopoly operator of a water supply system on related markets and customers.

We consulted on accepting the commitments proposed by Thames Water in May 2021. Although broadly supportive of our proposed decision, responses received to the consultation highlighted particular aspects of the competition concerns and the proposed commitments that were especially important to retailers and business customers. We discussed this with Thames Water, and it offered modifications to the commitments to address these issues.

We consulted on accepting the modified commitments offered by Thames Water in February 2022. We have considered comments made in relation to the modified commitments and have agreed with Thames Water two minor changes to the commitments to improve their clarity. We have also accepted a request from Thames Water that it be permitted to amend the expected delivery dates for five individual commitments. This has not affected the final deadline for complying with all the commitments as a whole.

We have now decided to accept the commitments and have closed our investigation. Accepting the commitments means that we have made no decision on whether the Chapter II prohibition has been infringed by Thames Water. Under the commitments Thames Water will be required to provide to Ofwat regular monitoring reports, and relevant supporting information, demonstrating its delivery of the commitments.

The commitments ensure that retailers and third-party service providers will be able to access business customers’ water usage data, either directly by ensuring that they can attach logging equipment to Thames Water’s smart meters or indirectly via subscription-free data services from Thames Water. This will enable retailers and TPPs to provide their customers with value-added services, such as leakage detection, water efficiency services and bill checking services. It should also help ease frictions in the business retail market by improving the quality and availability of meter read data.

Date opened

21 June 2019

Date closed

31 March 2022

Relevant powers

Chapter II CA98

Status

Closed

Key documents

Decision to accept binding commitments from Thames Water Utilities Limited, March 2022

PN 13/22 Competition Act investigation: Ofwat confirms changes to Thames Water’s smart metering policy for business customers, March 2022

Notice of intention to accept modified binding commitments from Thames Water Utilities Ltd in relation to the provision of access to its smart meters and digital data services, February 2022

PN 04/22 Competition Act investigation: Thames Water proposes to change smart metering policy for business retail customers, February 2022

Notice of intention to accept binding commitments from Thames Water Utilities Ltd in relation to the provision of access to its smart meters and digital data services, May 2021

PN 14/21: Thames Water offers to address competition concerns over smart meter roll out, May 2021

Guidance on the CMA’s investigation procedures in Competition Act 1998 cases: CMA8, January 2022

Prioritisation principles: Application to the Competition Act 1998, September 2010

Guidance on Ofwat’s approach to the application of the Competition Act 1998 in the water and wastewater sector in England and Wales, March 2017

Enquiries

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