New entrants can apply for water licence from April 2016

The water sector took a step closer to market opening today, with Ofwat’s proposal that new entrants will be able to apply for a licence to operate in the non-household retail market in just two months’ time.

The regulator confirmed that new entrants and existing incumbents can apply for a retail water supply license (the new WSSL) for the new market from April – a year ahead of market opening in 2017, and six months ahead of shadow market opening in October.

It also confirmed that companies which already hold current water supply licenses to operate outside their appointed areas (WSLs) will need to apply for a new licence.

The regulator said it had considered whether to allow existing holders of a WSL to be given modified licences, but that this would mean the company had not been assessed against the obligations of the new licence, “raising questions” about customer protection.

Therefore current WSL holders must apply for either a new retail water, or retail sewerage licences, or both.

Ofwat will charge an application fee of £5,250, which it said “reflects the costs it incurred” to undertake the necessary assessments. The fee will be the same regardless of type of application.

The regulator considered whether the process could be “streamlined”, but decided that for a company which has held its licence for more than a decade it would be “unsafe to place reliance on their original plans”.

However, current licence-holders which have applied within the last two years will be allowed to base their business plans on those originally submitted, “providing that it remains up to date”.

“Given the nature of the application process, we do not believe that this imposes a substantial burden on applicants and we would be most surprised if any existing WSL holders found the application process for the new licence unduly onerous,” the regulator said.

Ofwat is consulting on its proposals until 26 February.