by Megan Darby
The Scottish regulator has added its voice to a chorus of concern over UK government plans to introduce upstream competition to the water sector.
In a briefing note published last week, Wics warned that provisions in the draft Water Bill for “common carriage” could allow retailers to profit even if they increased costs in a region.
It called for more debate on the effects to households, including the risk of bill rises from unwinding regional cross-subsidies.
“All customers in an appointed business’s area should benefit from upstream reform, rather than risk allowing some customers unduly to benefit at the expense of others,” the note said.
The draft Bill only applies to England and Wales, but Wics chief executive Alan Sutherland said it could set a precedent. “If the principle is established in England that a company has got a track record of… putting water in another user’s pipes, there is no reason under competition law why that could not be implemented in Scotland,” he said.
It is possible to introduce upstream entry without regional de-averaging, Sutherland said, but he had not seen enough from Ofwat and the government to be “comfortable” there were sufficient protections.
Moody’s warns MPs of credit risk
MPs heard this week how exposure to competition could curb water companies’ access to investment funds. Giving evidence to the Environment, Food and Rural Affairs Select Committee, Moody’s analyst Neil Griffiths-Lambeth said “water companies could find themselves squeezed” between regulatory limits on bills and reduced interest from investors. Competition will cause water sector credit ratings to “deteriorate in the medium to long term”, he said.
This article first appeared in Utility Week’s print edition of 23rd November 2012.
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