NEWS RELEASE
Date: 28 February 2008
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Review of competition and innovation in water
The independent review of competition and innovation in the water industry, announced when the Government launched its new Water Strategy for England earlier this month, is to be led by Professor Martin Cave.
Confirming the appointment today in a speech to the Water UK City conference, Secretary of State Hilary Benn also published the review’s terms of reference.
Mr Benn said:
“I am very pleased that Professor Cave has agreed to lead this review. He has wide experience of competitive markets and working with Government and regulators, and was a non-executive director on Ofwat's advisory board - all of which make him excellently placed to take forward this important work.
”The Water Strategy highlighted the need for action to ensure we have a sustainable water supply into the future, both for people and for the environment, and in particular in the face of pressures from climate change. The review of competition has a vital role in this, through increasing efficiency of water use and delivering benefits to both business and household customers. We expect the review to begin next month and to take around a year to complete.”
Mr Benn also announced that the Government would be taking forward two of Ofwat’s recommendations alongside the review. One recommendation is to help ensure that customers of new entrant suppliers would continue to receive water in the event of an incumbent water company going into liquidation or otherwise failing, and another that will enable all new entrants to compete for national water supply contracts on an equal basis.
A further announcement is expected in the near future with more detail on the review of water charging. This review was announced as part of the Water Strategy, and will cover a broad range of issues including affordability, metering, tariffs and non-payment of water bills.
Notes to editors
1. The Government’s review of competition was announced in Future Water – the Government’s Water Strategy for England (www.defra.gov.uk/news/latest/2008/water-0702.htm) which was published on 7 February.
2. Martin Cave is Professor and Director of the Centre for Management under Regulation, Warwick Business School. Until 2001 he was Professor of Economics at Brunel University and specialises in regulatory economics, especially of the communications sector. He was a member of the Competition Commission from 1996 to 2002 and was on the Ofwat advisory board from 2002 to 2006.
3. The terms of reference of the Defra and HM Treasury commissioned review are as follows:
The review will have the principal goals of increasing efficiency of water use and delivering benefits to both business and household customers. The review will consider the scope to deliver benefits and drive innovation through developing competition and contestability in all aspects of the supply chain in the water and sewerage sector and will recommend changes to the legislative and regulatory frameworks needed to deliver those benefits.
The Review will include an assessment of the costs, benefits, risks and feasibility of extending competition and contestability in water and sewerage services by looking at potential models in liberalised markets, best practice in other industries and demand from stakeholders. This will include consideration of the impact of proposed changes on:
- availability and sustainability of water supplies;
- prices;
- quality of service;
- public health;
- environment;
- encouraging water efficiency;
- innovation, research and development;
- investment in infrastructure; and
- reducing regulatory burdens.
It is very important to Government that the interests of household customers are protected in the round, and vulnerable customers in particular. The review will consider changes that can be made to the current regime through secondary legislation as well as changes that would require primary legislation. It will include consideration of:
- the eligibility thresholds;
- statutory water supply licensing provisions, including the cost principle and policy on access pricing generally;
- extending access to sewerage services;
- Ofwat’s powers in relation to competition;
- statutory inset appointment provisions;
- relevant issues surrounding the abstraction of water; and
- any other specific changes that would deliver benefits and drive innovation through further competition and contestability in water and sewerage services.
Ofwat, the industry regulator, holds a formal advisory role for Government. Ofwat is carrying out its own work stream considering how best to further competition in the water and sewerage sector. This review for Government will draw on Ofwat’s work and will advise ministers on the outcome of Ofwat’s review.
4. Ofwat’s review of competition (http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/Content/pn4707) was published in December 2007 and included recommendations to Government on:
- changing the strategic supply regime to allow “supplier of last resort” protection for new entrants and their customers; and
- changing legislation to allow in-area trading by associate companies within the area of their associated parent water company.
The next stage of Ofwat’s review will be published in Spring 2008.
End
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Page published: 28 February 2008