Bilateral markets

In ‘Water 2020: Our regulatory approach to water and wastewater services in England and Wales’ May 2016, we set out how we intend to change the way we regulate to enable the sector to address the future challenges it faces and enable and encourage greater efficiency within the water sector. In Delivering Water 2020: Our final methodology for the 2019 price review, we introduced measures to make it possible for markets to play a more significant role in the supply of water resources.

However, measures related to the introduction of bilateral markets for water resources are contingent on certain provisions of the Water Act 2014 being commenced. By a “bilateral market” we mean a third party provider of water resources (such as an out-of-area water company or other holder of an abstraction licence) contracting directly with a retailer to sell water to its business customers.

Prior to commencement we need to identify and address policy issues, and consider the role of bilateral markets within the broader evolution of the development of water resources, including the new National Framework and the new cross-regulatory initiative, RAPID.

In June 2019, we published a Call for Information seeking views from interested stakeholders about the development and implementation of a bilateral market in water resources in England. The document and responses to the consultation can be found here.

We will engage further with stakeholders in 2020 and continue to liaise closely with Defra, the Environment Agency and the Drinking Water Inspectorate to ensure that the approach we take to the development of bilateral markets remains aligned. We also intend to work closely with RAPID to ensure that the approach to bilateral markets is consistent with broader work on water transfers, in particular around issues such as water quality and environmental impacts.