Arla Foods applies for self-supply water license

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Leeds-based Arla Foods Limited has applied for a retail water licence and sewerage licence
(“WSSL”), restricted to self-supply from water regulator Ofwat.

Arla Foods is a dairy company owned by 12,000 dairy farmers of which 2,500 are based
in the UK, which manufactures a wide range of products including milk, yoghurt, cream,
and cheese.

On 19 October 2020, Arla Foods applied for a water licence and a sewerage licence, with
a retail authorisation limited to self-supply.

If granted, this will enable Arla Foods to provide retail services to itself and associated persons.

A WSSL limited to self-supply will only be granted to supply premises supplied or served
using the water supply or sewerage system of an undertaker whose area is wholly or
mainly in England.

Large UK companies, including Sainsburys, John Lewis and Kellogg’s, have been granted self-supply licenses in the past year.

Arla Foods has ten sites in England and produces household brands such as Cravendale, Anchor, Lurpak and Castello.

The company recognises that water is a vital part in manufacturing these products, from cleaning and disinfection processes for milk (transportation) tankers and milk bottles, through to ensuring the everyday running of its cooling towers.

Arla Foods states that despite the challenging market conditions caused by COVID-19, its brand has continued to grow and production levels has not dropped.

According to the company, having a self-supply licence will provide it with the requisite level of visibility, and the data and control it needs to focus and deliver on its strategy of protecting the environment and safeguarding its business from water scarcity.

In order to facilitate this application, Arla Foods has entered into a partnership agreement with Waterscan to take on the role and responsibilities for the retail functions, including meter reading, Central Market Operating System transactions, wholesaler management and finding further water efficiency savings.

As such, Waterscan will act as the managing agent for Arla Foods and provide technical support and services while the business will build on our key relationships with wholesalers and pay water and sewerage charges through the settlement process.

Besides inviting comments on Arla Foods’ application, Ofwat is also seeking views on their proposal to modify the standard licence conditions to regulate self-supply licensees in a proportionate manner.

Under sections 17H and 17HA of the Water Industry Act 1991 (“the Act”), the Secretary
of State has issued standard licence conditions that apply to all water and sewerage
services licensees.

Under sections 17H(6) and 17HA(7) of the Act, in granting a licence, Ofwat may exclude
or modify those standard licence conditions to such an extent as they consider
appropriate to meet the circumstances of a particular case.

Following consultation, on 10 September 2018, Ofwat modified the standard licence conditions to make them applicable to self-supply licensees.

Under Part A.2 of the Standard Licence Conditions, Ofwat may issue a Condition A2
direction, bringing certain provisions of the Standard Licence Conditions into effect.

Some of the provisions that apply to other licensees are not brought into effect for self-supply licensees.

These relate to the obligation

  • to provide an annual certificate of adequacy (A.4);
  • the provision on arm’s length transactions (A.7);
  • and the requirement to comply
    with the Customer Protection Code of Practice (B.2).

A provision that only applies to self-supply licensees is brought into effect, namely the requirement to publish and keep up to date, a list of all the associated companies that are being supplied by the licensee.

Anyone wishing to make representations or objections with respect to the application and Ofwat’s proposal should do so in writing (which includes by email) to Ofwat at Centre City Tower, 7 Hill Street, Birmingham, B5 4UA or by emailing [email protected]

Representations must be received by Ofwat no later than 5pm on 24 November
2020.

More information about the application notice is available on the Ofwat website