This page sets out guidance for applications to Ofwat by Licensees and Appointees for derogations from compliance with obligations in the Wholesale Retail Code (‘WRC’) and/or any WRC subsidiary document.
As the WRC can apply both to Wholesale Contracts between Appointees and Licensees and also to written arrangements between the wholesale and retail businesses of an integrated Appointee, i.e. where an Appointee has an Associated Retailer, as defined in the MAC/WRC (the latter through the operation of Condition R4 of the Instrument of Appointment, known as the Stapling Condition), this document also includes the process for Appointees seeking changes to the derogations from the Stapling Condition set out in Schedule 8 to the MAC.
The guidance set out on this page applies to all Licensees and Appointees in England and Wales.
What is a derogation?
A derogation is a direction from Ofwat which relieves a licensee or appointee from compliance with certain of its obligations to comply with the WRC either as a result of it entering into Wholesale Contracts or as a result of the operation of the Stapling Condition. The power to grant derogations from compliance with these specific obligations will be introduced when the WRC is issued by the Authority. The possibility of derogations as a result of the operation of the Stapling Condition already exists in that condition and the provisions of Schedule 8 to the MAC.
Unless a derogation from compliance with a specific obligation in the WRC is granted by Ofwat, all Licensees and Appointees are expected to comply with all relevant obligations in the WRC. Derogations will not be granted retrospectively and Ofwat will still consider whether enforcement action for non-compliance is appropriate in the circumstances in accordance with our approach to enforcement.
Useful documents and information
- Derogations consultation – August 2016
- Derogations response document and further consultation given restructure of WRC and MAC – February 2017
- Final response document to consultation
- Derogations guidance
- Schedule 8 of the MAC
- Online submission form
Applying for a derogation
The application form for derogations is appended to the derogations guidance (link to be added) and provides further details of the types of items Ofwat expects market participants to consider as part of their application to Ofwat.
A valid application as outlined in more detail in the guidance should include as a minimum:
- Details of the applicant
- Derogation type
- Description of the derogation request
- An explanation of why the non-compliance is expected to occur
- A comprehensive assessment of the impact of the proposed derogation and non-compliance
- Proposals and timelines for restoring compliance
- A description of how customer impact will be minimised
- A description of how the granting of this derogation would not unreasonably adversely affect competitors.
- Any additional information to support your request
To apply for a derogation please complete the online submission form.
A list of derogations decisions will be listed below as they are granted. Schedule 8 of the MAC outlines details of:
- Derogations which provide for differential application of the Wholesale-Retail Code – applicable to more than one Undertaker; and
- Derogations which provide for differential application of the Wholesale-Retail Code – applicable to only one Undertaker.