Ofwat seeks information on protecting customer credit balances in the business retail market

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Water regulator Ofwat seeks information on the current arrangements for protecting customer money held by retailers in the business retail market.

In April 2017, the business retail market opened which enables businesses, charities and
public sector organisations in England to buy water and sewerage services from retailers,
rather than their regional water and/or sewerage companies.

To enable the opening of the market, changes were made to the Water Industry Act 1991 which included a requirement for Ofwat to issue, amongst other things, an Interim Supply Code, which sets out arrangements to address circumstances where a retailer is no longer able to provide retail services to its customers, for example where it has exited the market due to insolvency.

Where this happens, Ofwat will transfer affected customers at relevant premises to an
alternative retailer to ensure continuity of retail services (an ‘interim supply event’).

To date, there have been two retailers who have exited the business retail market and Ofwat has been required to use its powers under the Interim Supply Code to transfer affected customers, Aquaflow in 2019 and Tor Water in 2020.

While market entry and exit can be a sign of a well-functioning market, these interim supply events have highlighted concerns about ‘whether customers have an appropriate level of awareness of the risk to their credit balances held by retailers, including
for example credit on account for the pre-payment of services and deposits.’

We held a workshop with retailers and CCW in October 2019 to explore potential options for
protecting customer credit balances.

Due to the impacts of COVID-19, the regulator reports to have been forced to
pause work on this issue but are now keen to resume this work in collaboration with stakeholders.

This call for information therefore seeks views from stakeholders about the current
arrangements for protecting customer money held by retailers in the business retail market.

In particular, Ofwat is seeking stakeholders’ views on whether it would be appropriate to
consider introducing measures to better protect customers, which might range from periodically providing information to customers to make them aware that such credit is normally held on an unsecured basis through to considering the merits of some form of scheme to protect customer balances in the case of a retailer becoming insolvent and exiting the market.

The closing date for this call for information is 5pm Friday 30 April 2021.

More information about this consultation is available on the Ofwat website.