As the non-domestic water market approaches its second anniversary (1 April), a water retailer has informed Ofwat that it is “likely” to enter liquidation and become the first to exit the market.

The regulator will be stepping in to protect the customers of Aquaflow Utilities, which was granted its supplier licences on 4 January 2018.

Ofwat anticipates around 74 business customers will be affected by the retailer going into administration but it has advised it will ensure customers have a new retailer “as soon as possible”.

Aquaflow Utilities is expected to enter liquidation as of midnight on 9 April and Ofwat will use its powers under the interim supply code to protect customers.

Emma Kelso, senior director of customers and casework at Ofwat, said: “Aquaflow customers should be reassured that we have procedures in place to ensure there will be no disruption to your water and wastewater services.

“We are working alongside the market operator MOSL to allocate customers to a new retailer as quickly as possible. They will contact affected customers shortly after being appointed.

“Of course, it is always difficult to see a company fail, but this is the market in action. Not all retailers will thrive and it is possible that, in the future, others will leave the market too. As the market structures evolve, we will continue to make sure that customers are protected and continue to benefit from competition.”

Ofwat’s interim supply code, which the regulator published in March 2017 ahead of market opening, comes into effect when a licensee exits the market and its customers need to be reallocated to another supplier.

It is effectively the equivalent of the supplier of last resort process which is triggered when an energy supplier exits the market. So far this year three energy retailers have ceased trading – Economy Energy, Our Power and Brilliant Energy. They join a growing list of failed suppliers which exited the market last year.

A spokesperson for Ofwat told Utility Week: “The interim supply code was put in place to ensure customers are protected in situations such as this. This is the first time that we have had to use the interim supply process in the business retail water market and we can confirm that it is broadly equivalent to the supplier of last resort process in the energy market.

“We are working with MOSL to progress the interim supply process and customers should be reassured that they will be allocated a retailer as soon as possible.”

A spokesperson for MOSL added: “As the situation with Aquaflow develops and they exit the market, we are continuing to work closely with them, and Ofwat. We are ensuring that the robust procedures in place for just such an event, as set out in the market codes, are implemented swiftly and efficiently, without impacting Aquaflow’s customers.

“We would like to reassure all customers in the market that these procedures are comprehensive and focused on ensuring that the water and wastewater services provided to customers remain unaffected. Aquaflow customers will accordingly be allocated to a new retailer.

“Whilst this will be the first instance of its kind since the water retail market opened in April 2017, we believe it is to be expected in a maturing competitive market. Indeed, we would expect to see retailers both enter and exit, and MOSL will continue to fully support companies as they go through either process.”

Ofwat has published a “notice of revocation” on its website in relation to Aquaflow Utilities.

The water retailer contacted the regulator on 18 March and stated that its “shareholder will be unable to provide it with funding” for the next financial year (2019-20).

It provided Ofwat with information which indicated “it had not yet paid invoices from wholesalers” that were due for April 2019 and which should have been paid by 18 March.

On 25 March, Aquaflow told Ofwat it was “no longer carrying out its customer-facing functions” and provided documentary evidence it could no longer pay its debts.

The revocation of the licences will come into effect at 3pm tomorrow (28 March 2019).

Aquaflow Utilities has been contacted for comment.