Ofwat has launched a review of the market codes which set out credit requirements for retailers in the non-domestic water market.
The regulator indicated questions have been raised about whether the current requirements are “too stringent” and if this could be “dissuading” smaller, new entrants from competing in the market.
At present, retailers can choose to pre-pay wholesalers for the water their customers use, or they can choose to post-pay which includes providing a form of credit. This form of credit must cover the cost of supplying their customers for 50 days.
Wholesalers can choose to no longer work with a retailer if the do not have the means to do this.
Ofwat said to make sure the market is “effective” it wants to test the arrangements to ensure they are “proportionate and targeted”.
The regulator explained it also wants to see if there “are better ways to protect customers and make sure the market is dynamic and competitive for retailers.”
Emma Kelso, senior director of customers and casework at Ofwat, said: “The purpose of this review is to help us understand how the current arrangements relating to credit requirements for the business retail market are working and to examine the options available to remedy any issues which arise. In particular, we are keen to understand whether the current arrangements are effectively facilitating new entrants wishing to enter the market.”
Ofwat expects to publish “initial findings and next steps” by April 2018.