Trading and procurement codes

In the 2014 price review (PR14) Ofwat introduced water trading incentives to encourage water trading by incumbent water companies. In our final methodology for the 2019 price review (PR19) we confirmed we will maintain water trading incentives for new trades beginning in 2020-25 and maintain the requirement for trading and procurement codes to claim the incentives.

Water trading can benefit:

  • customers, as it can improve resilience of supply and allow more expensive investment in developing new resources within an water company’s area to be deferred, reducing future upward pressure on bills;
  • the environment, by ensuring water is supplied to where it is scarce and there are existing environmental pressures, instead of developing new resources or using unsustainable abstractions; and
  • water companies, by enabling companies to share in cost savings from trading instead of investing, and providing opportunities for companies to profit and innovate from trades.

Incumbent companies can only receive water trading incentives if they produce, and are compliant with, an approved trading and procurement code. The codes are voluntary and are only required if companies want to claim water trading incentives. The full requirements for the code are set out in our guidance document Trading and procurement codes – guidance on requirements and principles, published in May 2018.

What is a trading and procurement code?

A trading and procurement code sets out the principles and assessment criteria that companies will follow when assessing proposed water trades when dealing with other appointed companies or third parties. It can also include how companies will communicate with potential trade partners and some of the terms of trading with the companies.

What is the purpose of a trading code?

The purpose of the codes is to make sure incentives are only available for water trades that are environmentally and economically beneficial. The codes also work to make sure companies assess water trading options fairly and on an equal footing to their own water resource schemes.

Approved codes

As part of the process of approving the codes we publish a company’s draft code on our website for comment. Following the conclusion of a four week consultation period we will approve the code or provide reasons for not approving it.

Approved company codes are linked below. Copies of these codes are also available on company websites.

Company
Dee Valley (English);  Dee Valley (Welsh)
Dŵr Cymru
Northumbrian Water
Severn Trent Water
South East Water
Thames Water
United Utilities