Background: Review of incumbent company support for effective markets

We started our review of incumbent company support for effective markets in May 2019 with a letter from Ofwat’s CEO, Rachel Fletcher to the 15 incumbent English water companies.

Ofwat has for some time, promoted the targeted use of markets where they can deliver additional benefits for customers and society. Well-functioning markets can deliver better outcomes for both current and future customers in the form of:

  • lower prices;
  • better quality and more tailored services; and/or
  • improved choice.

They can also bring new approaches, which can help the industry respond to and meet its strategic challenges – such as a growing population, changing climate, affordability and changing customer expectations – in an efficient way.

In her letter, Rachel Fletcher stipulated that the current overall level of incumbent water company support for markets is unacceptable and that their activities will be monitored over the coming months. Ofwat, working closely with CCWater and MOSL, will review their progress against these areas in Autumn 2019.

The letter listed the areas that needed improving:

  1. Effective engagement in and support for initiatives aimed at driving improvements to the business retail market;
  2. Supporting a vibrant competitive market for developer services; and
  3. Effective support for the development of new markets.

In September 2019, Ofwat’s Senior Director of Markets and Enforcement, Emma Kelso detailed the questions and evidence required for the review in a letter to all of the incumbent water companies. The letter was also sent to retailers in the business retail market, self supply licensees and NAVs to seek their views.

Companies and other stakeholders were asked to respond with their answers and evidence. Answers to questions raised during this stage can be found here.

Below are the main responses we have received from the incumbent water companies. Details that may be commercially confidential or relating to personal data have been redacted.

We have published supporting documents we received from the incumbent water companies, as well as responses received from other interested parties. Again, details that may be commercially confidential or relating to personal data have been redacted. These can be found here.

After a short delay resulting from Covid-19, we have published the results of our review.