See also information on interim supply on MOSL’s website.
Water Retailers in financial distress: information for company directors, advisors and administrators
Following reviews of previous cases of retailers experiencing financial distress, we have considered ways in which we can improve processes to ensure all parties are able to make better informed decisions. One improvement that we have identified is to enable easier access to information for those appointed to advise retailers in financial distress, which may include potential administrators.
We encourage company directors, advisors and administrators to contact us early in the event of a potential retailer exit from the market. Contact Ofwat enquiries, marking the message “urgent – interim supply”.
Please see our note , which provides initial information and links on market arrangements in the event of a retailer entering administration, the role of Ofwat as regulator and of MOSL as market operator.
What is the interim supply code?
A sign of a well-functioning, competitive market is one that is characterised by companies entering and exiting that market, as determined by market forces. An exit from a market can be:
- orderly – for example the sale of a company’s customer book, or
- disorderly – for example if a company goes into liquidation.
As water and wastewater services are essential utilities, protections are in place in the event that a retailer makes a makes a disorderly exit from the market so that the supply points of affected customers’ premises are allocated to an alternative retailer without undue delay.
The Interim Supply Code (ISC) sets out the interim supply arrangements where a retailer is no longer able to provide services to its customers. Where this happens, customers do not need to take any action as we will transfer their water and wastewater retail services to an alternative retailer. During this time, customers will not notice any change to their supply as their water and wastewater services will continue as before.
Interim supply arrangements only apply to retailers, they do not apply to wholesale monopoly water companies.
We are currently consulting on how the current interim supply arrangements can be strengthened so that they can adequately protect customers and are robust for the longer-term functioning of the market. See more at ‘Strengthening customer protections in the Business Retail Market: the Interim Supply process – a consultation‘.
Procedure for allocating the supply points of affected customers’ premises
Alternative retailer election
We are only able to allocate the supply points of affected customers’ premises to an alternative retailer who has elected to opt-in, or who has a legal obligation, to participate in interim supply arrangements. A supply point is the point at which water services or sewerage services are provided to premises. In parallel to the requirements set out in Code Subsidiary Document 0004 of the Wholesale Retail Code, the ISC sets out the procedures for a retailer to elect to be opted-in for interim supply arrangements, removal of such an election or the temporary suspension of such an election.
When must an alternative retailer act?
We have powers to require an opted-in retailer to take over the supply of retail services in specific circumstances. These circumstances are defined in the ISC as being:
Revocation
Revocation of the exited retailer’s licence. The standard conditions for water supply and sewerage licences set out the circumstances in which a licence may be revoked.
Termination of a wholesale contract
Termination of a wholesale contract (the contract between a wholesaler and retailer) by the wholesaler, in accordance with the provisions of the Wholesale Retail Code.
Part E of the Business Terms of the Wholesale Retail Code set out the circumstances in which the wholesale contract may be terminated.
Allocation of supply points
The ISC describes the notice period and information that we will provide to retailers and relevant wholesalers when there is an interim supply event. It also sets out the basis on which we are able to reallocate the supply points of affected customers’ premises to an alternative retailer. The allocation options available include:
Interim supply offers
These are sought from relevant opted-in retailers. We will send invitations to retailers who meet certain criteria (which will depend on the facts of the interim supply event) to submit offers. We will assess offers based on the criteria set out in the invitations, and choose one, or more, alternative retailers to provide the required services.
Interim supplier allocation process
We instruct the Market Operator to allocate supply points in one or more relevant wholesaler area(s) in accordance with the Wholesale-Retail Code. Broadly speaking under this mechanism, an equal number of supply points would be allocated to each opted-in retailer for a particular service in each region.
Alternative retailer’s obligations
The ISC sets out the terms and conditions under which an alternative retailer may provide interim supply to affected customers. Retailers must ensure that the terms and conditions comply with a number of principles and requirements. These include that:
- the price terms within the terms and conditions are reasonable in the circumstances;
- no undue preference is shown to and that there is no undue preference against any affected customers compared with the alternative retailer’s other customers;
- the terms and conditions must be consistent with the alternative retailer’s obligations under the Water Industry Act and its licence;
- restrictions on when the terms and conditions, as they apply to an affected customer, may be varied or terminated; and
- there shall be no restriction on an affected customer’s ability to switch to another retailer, or to other terms and conditions offered by the alternative retailer.
The ISC also sets out the information that an alternative retailer must provide to affected customers is:
- that they are now the affected customer’s provider of retail services, and that the previous retailer is no longer supplying those services;
- the reasons for this;
- the date on which the alternative retailer started providing the service(s);
- relevant contact details;
- that the affected customer may switch retailer;
- the steps the alternative retailer shall take to resolve any outstanding service requests and/or complaints between the affected customer and its previous retailer;
- a copy of the terms and conditions under which the affected customer will receive retail services; and
- a statement that alternative terms and conditions may be available, and how these can be obtained.
More information about the process for interim supply for retailers, can be found on MOSL’s website.