Questions and answers: Review of incumbent company support for effective markets

We are publishing questions that incumbent companies and other stakeholders have asked us regarding our review and our answers to them.

 

Question received 16 September 2019:

The letter states that it has been sent to ‘all incumbent water companies’, could you please provide a list of the companies to which the request was sent? For example, NAVs are licensed undertakers with NHH retailers and potentially developers, SLPs and NAVs in their areas, have they been sent this letter?

  • We differentiate between “incumbent” water companies as those formed at privatisation (or through mergers since) and which are subject to the price control process, and “NAVs” as new entrants following privatisation who are subject to a relative price control. We recognise that both are licensed in the same manner, but they are fundamentally different in scale which is reflected in how they are regulated.
  • NAVs have identical obligations as incumbents in terms of providing wholesale services to retailers and in providing new connections. However, NAVs tend to serve predominately domestic sites with limited non-household customers and, following the build out of their site, make limited new connections. Consequently, for the purpose of this assessment, we are primarily considering NAVs as customers of incumbent water companies and for proportionality reasons we do not consider that it is appropriate to include them within the same request. Yet, NAVs have been made aware of this review and they may want to share their own best practice with us.
  • The list of incumbent water companies can be found here. The list below have been sent the letter:
  1. Affinity Water
  2. Anglian Water
  3. Bristol Water
  4. Northumbrian Water
  5. United Utilities
  6. Portsmouth Water
  7. Sutton and East Surrey
  8. South East Water
  9. Southern Water
  10. South Staffs Water
  11. Severn Trent Water
  12. South West Water
  13. Thames Water
  14. Wessex Water
  15. Yorkshire Water

Question received 16 September 2019:

Have these questions also been asked of ‘incumbent non-household retailers’?

  • This review is targeted at incumbent water companies. Therefore, the questions have been asked of incumbent water companies only (i.e. for the purposes of the business retail market, in their capacity as wholesalers). We have made all retailers, including associated retailers, aware of our information request and have invited views from these and other stakeholders to help inform our assessment.

Question received 16 September 2019:

Is there a point of contact that questions should be directed to?

  • We have set up a mailbox which is being monitored for queries related to this review: incodem@ofwat.gov.uk.

Question received 30 September 2019:

On page 2 of the information request you state that the responses to the letter will be published on your website and that we should make representations if we consider any of the information to be confidential. 

With regards to any information that we believe to be confidential on the grounds of commerciality we will make specific representations as appropriate, but in respect of documents that may contain personal information (names, email addresses, phone numbers for example) would your preference be for us to redact the personal information and replace with Job Titles, or to provide un-redacted documents and then make separate representations?  

  • Our aim is to publish responses with personal information redacted. It would therefore be helpful if responses minimised the use of personal information, except where it is relevant to the response. Where personal information is included in the response, please make separate representations.

Question received 4 October 2019:

Do you expect incumbents to outline how they will ensure a level playing field in the full serve NAV market; in particular how they will correct for the market distortions they create if they provide income offsets, adopt a regional infrastructure charge and do not charge developers for treatment and resources expenditure required as a result of their development?

  • We expect incumbents to explain how their engagement in different markets, including charges to alternative providers as well as end customers (and any relevant discounts), does not inhibit alternative providers from competing effectively both with the incumbent and between themselves.