Ofwat's reply to open letter on water access charges

Ofwat's reply (web page, about 3 pages) to a letter by potential new licensees expressing concerns about access pricing under the Water Act 2003, including potential anti-competitive effects of the retail-minus or efficient component pricing rule (ECPR) approach. (A similar concern is explored in Access pricing in water | viewpoint: Franck.)

In its reply, Ofwat claims that the Water Act 2003 requires a form of ECPR and thereby constrains Ofwat's and incumbents' discretion about pricing. In particular, it states that "appointed water companies are legally required to follow the costs principle when calculating access prices" and that competition law will not apply "to the extent that companies will be deemed to be engaging in conduct [...] to comply with a legal requirement in calculating access prices". Ofwat also claims that "costs principle" mandated by the Water Act 2003 "should allow efficient competition to develop and should ensure that customers who do not participate in the new regime do not subsidise those who do".

This seems largely a restatement of Ofwat's known views. No responses are explicitly sought by Ofwat, but a technical stakeholder workshop to be held on Thursday 28 July 2005 may provide an opportunity for further debate.

For further information or advice please contact Franck Latrémolière.

Filed under Ofwat, Water.

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