3 Market reform |
9. In Water for Life Defra proposed increasing
competition in the water market with the intention of improving
efficiency and ultimately lowering bills for customers. At present,
the water sector in England and Wales consists of 21 vertically
integrated, regional monopoly, water only or water and sewerage
companies. With limited exceptions for very large users of water,
customers are unable to switch their water supplier. The lack
of competition, it is argued, hinders innovation and efficiency,
and can be time-consuming and expensive for businesses with several
premises across the country who have to process multiple bills
from different water suppliers.
10. Clause 3 of the Draft Bill enables a Minister,
by order made by statutory instrument, to remove the existing
50 megalitre threshold at which non-household users are able to
switch their water supplier.
This change would increase the size of the potential market and
make it more attractive to new entrants.
There are a number of other provisions designed to reduce the
barriers to new entrants to the market, such as a reduced regulatory
burden through the introduction of charging rules and market codes,
and the removal of the requirement for new entrants to establish
a separate ring-fenced limited company before entering the market.
11. Provisions in Clause 1 and Schedule 1 introduce
competition to the "upstream" end of the supply chain.
This would enable new entrants to provide raw or treated water
into an incumbent's network without being obliged (as is currently
the case) to provide retail services to customers. Schedule 1would
also remove some of the restrictions on access to water companies'
treatment and storage systems and allow new entrants to provide
their own network and retail infrastructure. Clause 4 and Schedule
3 provide for a similar licensing regime to the sewerage system.
12. There was broad agreement from our witnesses
about the Draft Bill's overall approach to reforming the retail
market, although concerns were raised about particular aspects
of the proposals. In contrast, witnesses identified a host of
difficulties with proposals for the upstream reforms, questioning
both the policy intention behind them and the practicalities of
13. In 2008 the then Government commissioned
Professor Martin Cave to report on competition in the water sector.
His report, published in April 2009, recommended significant changes
to encourage competition and allow non-household customers greater
choice over their supplier.
In Scotland there has been a competitive retail water market for
non-household customers since 2008.
Scottish Procurement, the body responsible for public sector procurement
in Scotland, told us that the Scottish public sector (which makes
up approximately 20% of the Scottish competitive market for water),
is on track to save up to £25 million over the first three
years of tendering for its water supply.
Alongside these financial benefits, Scottish Procurement also
highlighted the non-monetary advantages of competition, including
improved service levels and sustainability benefits.
14. It is clear that there is widespread support
from customers for the introduction of retail competition. Network
Rail told us that since the introduction of competition in Scotland
they have seen a "significant improvement" in the service
they receive and they looked forward to being able to choose their
supplier in England as well.
The Federation of Small Businesses said that it has been campaigning
for greater competition "for some time",
and Greene King and Asda were also supportive.
Water companies were also in favour of the Government's policy
intention, with Water UK stating that it "fully supports
giving choice to business customers... companies are committed
to being an active partner in making this a reality".
Nonetheless, concerns were raised about particular aspects of
the proposed reforms, and we explore these below.
ABOLITION OF THE COSTS PRINCIPLE
15. Under the current regime, new entrants to
the market wishing to purchase water for retail must apply separately
to each incumbent water company from whom they wish to purchase
a wholesale supply and negotiate a price using the "costs
principle". The costs principle follows a "retail minus"
approach in which the discount provided to retailers is determined
by calculating what portion of the incumbent company's costs could
reasonably be avoided, reduced, or recovered in some other way
(known as "ARROW" costs). Any additional costs that
the incumbent will incur in providing access to the retailer are
set against the ARROW costs to determine the final price of the
16. Introduced to ensure that household customers
do not end up subsidising businesses, the costs principle has
been criticised for providing little incentive to incumbent water
companies to become more efficient.
The complexities involved in negotiating separately with multiple
wholesalers acts as a further barrier to new entrants. Schedule
2 would replace the costs principle with a wholesale access pricing
regime, with charging rules to be developed by Ofwat. Whilst generally
in agreement with the decision to abolish the costs principle,
the evidence we received drew attention to the potential for the
new approach to bring its own problems. The Consumer Council for
Water recognised that the existence of the costs principle had
constrained competition, but noted that this was at least in part
because of its role in protecting household customers. The Consumer
Council for Water believed that "it should be possible to
identify a different way of setting access prices in a way that
does not [act to] the detriment of domestic customers",
and that "it must be the regulator's job to make sure that
Council considered that the Bill should make clear that the abolition
of the costs principle must not lead to the household sector subsidising
costs in the contestable non-household market, and suggested that
the Draft Bill be amended to reflect this.
Ofwat told us that their existing primary duty to protect the
interests of customers meant that they would "not be in the
business of replacing the costs principle with something that
is bad for customers... we already have that safeguard."
The regulator was cautious about including further protection
on the face of the Bill, noting that the cost principle's existing
status in primary legislation had made it very difficult to change
it when it was found to be inefficient, and that consequently
"we need to be very careful what we write on the face of
Defra shared Ofwat's view, telling us that they "did not
feel that it needs to be on the face of the Bill", but that
"it would certainly be in statutory guidance".
17. We believe that protecting
householders from subsidising competition in the non-household
sector is a fundamental principle that should be enshrined in
primary legislation. We recommend that the Draft Bill be amended
to reflect this. We are not convinced
by the argument that such a course of action would be likely to
present similar problems of inflexibility as have emerged in relation
to the existing costs principle, as the Bill's wording need not
set out in detail the regulatory mechanism by which this aim should
be achieved and could thus afford flexibility to the regulator.
ESTABLISHING A LEVEL PLAYING FIELD
18. If new entrants are to be encouraged to enter
the market, it is essential that they have confidence that they
will not receive unfavourable terms or treatment from the incumbent
water companies upon which they will, at least in the first instance,
rely for the wholesale supply of water. New entrants will be competing
directly against the incumbent's retail business, and as the incumbent
companies will continue to control the wholesale supply of water,
there is naturally a danger that they will discriminate against
new entrants to protect their own interests. One way to achieve
a level playing field between new entrants and incumbent companies
would be to require the legal separation of incumbents' retail
arms. This was recommended by Professor Martin Cave in his Independent
Review of Competition and Innovation in Water Markets, but Defra
subsequently made clear in the Water White Paper that they had
decided against requiring legal separation in response to concern
that structural change to the industry could unsettle investor
Instead, they would rely on Ofwat to police non-discrimination
via regulatory means.
The Draft Bill has not departed from this approach.
19. Business Stream, a potential new entrant
to the retail market, expressed concern that the Draft Bill was
not sufficiently robust in its approach to ensuring a level playing
field. In particular, they highlighted the absence of any significant
mention of non-discrimination and a lack of clarity over what
the separation requirements would be in the absence of legal separation.
The company told us that:
The principle should be that, as a new entrant, I
should be able to access exactly the same terms, pricing and service
levels as their incumbent company. In terms of communication,
the way people interact within that integrated water company needs
to be considered. They cannot be able to access back doors and
other channels that I, as a new entrant, do not have.
Business Stream argued that, if the separation requirements
were not clear from the start, "we will end up with multiple
claims in the competition courts or to the regulator that are
lengthy, costly and burdensome, and customers will not get benefits".
Ofwat told us that in regulating the market they would require
"demonstrable Chinese walls between the retail and wholesale
arms within an incumbent".
20. We considered the issue of separation in
our report on the Water White Paper and concluded that Defra should
consider including a requirement for functional separation in
the Draft Bill. The
evidence we have received in the course of pre-legislative scrutiny
has reinforced our view that, in the absence of legal separation,
every effort must be made to reassure new entrants that they will
compete on a level playing field. We do not doubt Ofwat's assurances
that they will seek to achieve this through regulation, but we
believe that it is a principle of sufficient importance that it
should be included on the face of the Bill itself. We
recommend that the Draft Bill be amended to include a requirement
for the functional separation of incumbent companies' wholesale
and retail arms. We further recommend that the principle of non-discrimination
be included on the face of the Bill.
EXITING THE RETAIL MARKET
21. A natural consequence of competition is that
whilst some companies will thrive, others will be less successful.
Those incumbent companies with less efficient retail arms may
decide that they would be better served by exiting the retail
market and focusing on their wholesale operations. At present,
however, they are obliged under the terms of their licences to
continue to offer a retail service.
22. In our report on the Water White Paper, in
response to concerns raised by both the English and Scottish regulators
and water companies themselves, we recommended that the Government
should include a clause in the Draft Bill allowing incumbents
to exit the retail market, should they wish to do so.
In coming to this conclusion, we were particularly struck by Ofwat's
view that allowing such a mechanism would be an important factor
in achieving a "well-functioning" and "dynamic"
market. In the event, the Government rejected our recommendation
and the Draft Bill is silent on establishing an exit route.
23. It became apparent in the course of this
inquiry that there is little support for the Government's position.
Again, both regulators pressed for the inclusion of an exit route.
Perhaps more strikingly, incumbent companies and new entrants
were united in calling for the Bill to include an exit clause.
We put it to the Minister that the Department appeared to be alone
in its view and he told us that allowing a company to exit could
be a "seismic shift" in the structure of the industry
and risked unsettling investors.
24. Given the weight of evidence from regulators,
incumbent water companies and new entrants we are not persuaded
by the Minister's arguments. In particular, we cannot accept that
allowing voluntary exits would unsettle investors given that a
water company would have no reason to act against its own interests
by choosing to exit the retail market if this would have an adverse
impact on investor confidence. We
recommend that the Bill include provisions to enable incumbent
companies to voluntarily exit the retail market.
TIMESCALE FOR RETAIL REFORM
25. The introduction of a competitive retail
market is long overdue. The Major Energy Users Council told us
that "customers... have waited many years for full-scale
retail water competition",
and that there was a "real appetite" amongst its members
to be able to choose supplier, with poor levels of customer service
giving rise to an "urgent demand for retail competition".
Whilst the provisions in the Draft Bill are a start, the vast
majority of the work needed to implement reform will fall to regulators
and water companies. The likely timescale for the reforms will
consequently depend not only on the speed with which legislation
is introduced, but also on the commitment with which companies
and regulators approach the task of establishing the detailed
design of the market. Defra has established a High Level Group,
consisting of representatives from the UK, Scottish and Welsh
Governments, Ofwat, the Water Industry Commission for Scotland,
customers and the water and sewerage industry, which is intended
to drive the process of reform. The High Level Group will report
directly to Ministers.
26. We received mixed evidence on the progress
of the High Level Group. At the date when we took oral evidence
from the Minister it had met twice; he told us that he was satisfied
with its progress and that it was "working well".
Water UK and Anglian Water told us that the group had got off
to a "good start".
Ofwat were more equivocal about its impact, telling us that they
"do not think we are going to deliver market reform through
meetings; we are going to achieve it through activity, action
and deliverables... the real activity has to happen in the engine
rooms... We could do with a little bit more effort at that level."
The Water Industry Commission for Scotland were critical, saying
that they were "disappointed with progress to date"
and that "the lack of a clear, fully developed and agreed
vision...is delaying progress".
27. In our report on the Water White Paper, we
recommended that Defra should aim to open the retail market three
years after Royal Assent of a Water Act. Although obviously dependent
on the timing of legislation, this would appear to be broadly
in line with the likely target date of April 2017 that the Government
set out in the Draft Bill,
a target that the Minister said remained "doable".
28. We are pleased that the
Minister remains committed to opening the retail market in 2017.
Business customers have been pressing for greater competition
for some years and are understandably keen that the reforms retain
momentum. We were therefore concerned by the suggestion that the
progress of the High Level Group set up to drive the reforms may
be hindered by the lack of a clear vision. We recommend that the
Government set out what steps it is taking to provide the necessary
direction and oversight of the High Level Group in its response
to this report.
29. We recommended earlier in
this report that the Government publish statutory guidance to
the regulator in draft alongside the Water Bill. We note that
by doing so it would provide a greater level of certainty for
market regulators and participants which would greatly assist
them in the operational development of the competitive retail
30. Alongside opening up the retail market to
increased competition, Defra has also set out plans to encourage
upstream competition (i.e. the input of raw or treated water into
a water company's network, or the removal of waste water or sewage
for treatment). At present, the Water Supply Licensing regime
requires licence holders that provide upstream services to also
provide retail services. That requirement may discourage new entrants
who could provide competitive upstream services but do not wish
to deliver retail services. Clause 1 and Schedule 1 of Draft Bill
will "unbundle" the existing licensing structure so
that new entrants can sell raw or treated water into an incumbent's
network, or remove and treat waste water from a network, without
having to also provide retail services. New entrants will also
be able to access water companies' treatment and storage systems
(rather than just their mains and pipes) and to hold a new network
licence which will allow them to own and operate their own infrastructure
which they can connect to an incumbent's network. A similar scheme
of licence authorisations will be introduced for sewerage.
31. Unlike the introduction of retail competition,
which was largely uncontroversial in principle, we received a
great deal of evidence expressing concern about the proposed introduction
of upstream competition. These concerns stemmed in part from the
"enabling" nature of the Draft Bill, which we have commented
on earlier in this report. The lack of detail contained in the
Draft Bill was felt to be of particular concern in relation to
upstream reforms due to the limited experience of introducing
such reforms in other jurisdictions, in contrast to retail reforms
where the Scottish experience provides a clear starting point.
The resulting concerns can be split into two broad categories:
the potential for a loss of investor confidence due a lack of
clarity about the detail of the reforms and in particular the
potential for the "cherry picking" of customers; and
a loss of resilience in the sector leading to a less effective
response to short-term interruptions to supply and longer-term
pressures such as drought. We set out the evidence relating to
these issues below.
32. Since privatisation, the water industry has
attracted over £108 billion of investment.
Moody's Investors Service told us that the sector is "regarded
very much as a gold standard. It has attracted [...] very significant
investment at very low cost",
and that the industry's regulatory regime was held "in very
high regard for its historic transparency, predictability and
clear principles that have been consistently applied."
Water companies warned that the lack of clarity surrounding the
Draft Bill's existing provisions on the introduction of upstream
reform could see the industry's reputation as a safe haven threatened.
Thames Water argued that
Any reform of upstream markets... inevitably raises
financial and regulatory risk... a lack of clarity as to the future
regulatory regime could undermine incentives to invest... We would
therefore encourage clarity to be provided, either on the face
of the Bill or through the production of clear and binding Government
guidance. If not, there is a danger that increased uncertainty
will increase the risks associated with investment, pushing up
the cost of finance, ultimately leading to an adverse impact on
33. Despite taking evidence on this issue from
water companies, Ofwat and Moody's, we have found it difficult
to quantify how far these fears are likely to be realised. Our
scrutiny was not helped by the ongoing dispute between Ofwat and
water companies over Ofwat's proposed modifications to water companies'
licence conditions, an issue which is separate to the Draft Bill
but has been contemporaneous with our inquiry and has itself led
to concerns about investor confidence.
We sought to establish with Moody's how far their stated concerns
about a potentially "credit negative" outlook for the
industry, which they
issued in October 2012 could be attributed to the Draft Bill itself
and how far it might be due to the licence modification proposals,
but they were not able to take us any further, telling us that
"investors do not make that distinction. We do not particularly
make that distinction. What they are doing is looking at the broad
direction of travel".
Similarly, Moody's said that one could not "disaggregate"
the particular elements of upstream competition that might pose
a particular risk to investor confidence.
They did comment, however, that "Uncertainty is credit negative...
if you have certainty, that is always a more positive thing".
DE-AVERAGING OF PRICES
34. Water and sewerage customers usually pay
the same prices within a given company's area, even if the costs
of serving those customers vary because the costs of building
and maintaining the infrastructure are averaged out across the
company's customer base. An individual customer's bill will depend
on a variety of factors including the amount of water they use
(if their supply is metered), or the rateable value of their home.
Even if metered, the bill does not, however, reflect the true
cost of supplying water to that individual customer. So, for example,
the distance that a customer is from a treatment works, or the
additional cost of the infrastructure required to provide a water
supply to a remote household, is not routinely taken into account
when calculating individual bills.
35. The potential for upstream reforms to lead
to a move away from this position to a regional de-averaging of
prices was raised as a concern by many of our witnesses, including
water companies, the Consumer Council for Water, and the Water
Industry Commission for Scotland. The potential for de-averaging
would come about because of the incentive for new entrants to
"cherry pick" those customers within an incumbent company's
region that are the lowest cost to serve. WICS illustrated the
possible impact of this with an example:
If a dairy in a rural community were to [identify
an alternative source of water that would meet its needs or] reduce
the strength or volume of its waste, this could lead to the partial
stranding of an asset built to serve that customer. It may be
the only significant business (in population equivalent terms)
in the area and potentially significant costs would now have to
be met by those customers that remain, including households if
the asset that was constructed is to be paid for in full.
36. Ofwat told us that it was a "myth"
to say that upstream reforms would lead to a de-averaging of prices
between rural and urban household customers.
However, they appeared to accept the prospect of some element
of de-averaging in the non-household sector, saying that there
was "clearly an argument for giving non-household customers,
particularly heavy users of water and sewerage services, cost-reflective
price signals, so that they make efficient decisionsfor
example, on where to locate."
The Minister told us that he would "hold Ofwat to their duty
to make sure that we are not penalising customers who live in
rural areas because it is more expensive to provide water to them"
and that "we think it continues to be a very clear duty on
the regulator to make sure that prices are averaged in the right
37. In order to improve certainty
for all parties, including investors, we recommend that Defra
make clear on the face of the Bill the key principles that will
underpin the introduction of upstream reforms. This should include
a clear commitment that the reforms will not lead to any further
de-averaging of prices.
38. The prospect of de-averaging was considered
to pose a particular risk to investor confidence. Ofwat currently
determines the total revenue for each water company over a five-year
period through the Price Review process. In price-setting, Ofwat
takes into account the need to provide a return to investors and
calculates the level of this return using the Regulatory Capital
Value, or RCV, model to measure the capital invested in the business.
United Utilities argued that de-averaging of prices could threaten
the RCV model and therefore deter investment:
The draft Bill... proposes establishing a system
whereby future remuneration of the RCV will become less plausible
over time, with the number of customers contributing to it becoming
fewer and the composition of RCV reflecting a larger number of
The process of "cherry picking" by new
entrants will undermine the economic sustainability of existing
wholesale activities and continued servicing of the RCV will impose
greater burdens on those customers who are unable to "opt
out"; the largest proportion of these will be domestic customers.
As this risk becomes self-evident to the investment community,
the cost of capital will be driven higher making the long-term
viability of RCV more questionable.
39. Defra have acknowledged that upstream reforms
are likely to have some impact on the cost of capital. The impact
assessment which accompanied the Draft Bill (first published alongside
the White Paper) assumed a 1% increase in the cost of capital,
leading to an increased cost of finance of £426m.
This increase would, according to Defra's calculations, be outweighed
by the savings that upstream competition would bring: the impact
assessment put the net present benefit of the reforms at £1,952
million. The impact assessment did, however, note that the impact
of the reforms on financing costs was a "key uncertainty",
and that "the final financing impacts are also closely related
to Ofwat decisions about how it treats stranded assets and the
ongoing protection of the RCV".
United Utilities said that the impact assessment's cost/ benefit
analysis had been subject only to "limited" consultation
by Defra and questioned whether the expected £2 billion benefits
would materialise. They called for an independent review of the
cost/benefit analysis in the impact assessment, to allow input
from a wider range of stakeholders and consideration of industry
assessments of costs and benefits.
In oral evidence Defra told us that they had not re-visited the
impact assessment since its publication,
but that a full, updated impact assessment would be carried out
before the introduction of the Bill itself.
LOSS OF RESILIENCE
40. A further concern expressed by many of our
witnesses was that upstream reforms could lead to a loss of resilience
in the sector. South West Water explained that:
Currently, an element of capacity is built into the
network to accommodate peaks in flows or to ensure continuity
of service where an aspect of the system fails. However, in a
"competitive" environment, where new entrants will be
competing to provide resources and assets at the most efficient
cost, it is not yet clear how these critical capacity safety nets
will be maintained.
Similarly, it was argued that a more competitive,
fragmented market would make it more difficult for water companies
to work together to safeguard supply. The Food and Drink Federation
said that a competitive upstream model could "weaken, or
even undermine, the degree of co-operation required between water
companies and their customers in terms of maximising the efficient
use of resources".
The Local Government Association drew on its experience of the
severe drought in 2012, noting that it "brought together
water companies and a range of stakeholders, including the LGA,
to manage the immediate stakeholder concerns and communication
needs. Government should ensure that a potentially more complex
water sector could still be marshalled this way".
Also commenting on the 2012 drought, Wessex Water described how
water companies had worked together to transfer supplies to areas
of need and said that they were advised at the time that they
would not have been able to co-operate in such a way in a competitive
41. We are concerned by the
levels of uncertainty in the proposals for reform of the upstream
markets and we do not believe that the case for these reforms
has yet been fully made out. Given the potentially serious implications
of the reforms both for customer bills and for national resilience
in the face of climate change and population growth, we believe
that further work must be undertaken to establish how upstream
reforms can be introduced in a way that will preserve investor
confidence, ensure that customers do not face increased bills,
and maintain resilience in the sector. We recommend that Defra
revisit this issue, inviting evidence from water companies, consumer
representatives and other interested parties both on the likely
impact of the reforms and on the detail of their implementation.
This work should be commenced immediately.
TIMESCALE FOR UPSTREAM REFORM
42. A great deal of further work must be undertaken
by Defra, in consultation with interested parties, before any
steps can be taken to introduce upstream competition. Consequently,
upstream reforms are unlikely to be brought in at the same time
as the retail reforms; there is simply too much preparatory work
to be carried out and the Minister told us that the Department
had "always anticipated upstream competition being introduced
in a phased manner on a slower timescale".
Nevertheless, we believe that it is important to be as clear as
possible about the reforms' expected timescales to enable water
companies and investors to engage with the Government and prepare
for the new market. We
recommend that the Bill set target dates for the final decision
on the form and scope of upstream reforms, and the opening of
the upstream market.
Engagement with the devolved
43. Water policy is a devolved issue. The Draft
Bill has been developed in conjunction with the Welsh Government
and will apply in both England and Wales. In written evidence
the Welsh Government criticised Defra's engagement.
The Minister told us that he had recently met with the Welsh Minister
and "agreed to have further discussions in the very near
future to make sure we are ironing out any difficulties that may
be perceived to exist across the border".
44. The legislation will enable the creation
of a joint English-Scottish market. Creating such a market will
require close working between the UK and Scottish Governments
and the respective regulators. The Scottish regulator, the Water
Industry Commission for Scotland (WICS), has expressed concern
that some of the provisions in the Draft Bill for reform of the
upstream market south of the border could have unintended consequences
in Scotland. WICS argued that "the combination of the Competition
Act and legal precedent could result in de-averaging in England
spilling over into Scotland".
Defra told us that they did "not fully understand the issue
that WICS has raised and will be exploring this further with them.
We currently believe that changing the regime in England and Wales
will not make any substantive difference to the legal position
in Scotland under the Competition Act".
45. Given the UK-wide implications
of the Draft Water Bill, it is essential that Defra takes a collaborative
and consultative approach to engagement with the devolved administrations.
In its response to this report we expect Defra to be able to confirm
that there are no outstanding areas of dispute or concern with
either the Welsh or Scottish administrations.
16 The threshold requirement would remain in Wales
unless and until new licensing arrangements are fully commenced
in Wales. Back
The Welsh Government's current policy is for the existing 50 million
litre a year threshold to be retained in Wales. Back
Draft Water Bill, p18 Back
Professor Martin Cave, Independent Review of Competition in Water
Markets; Final Report, April 2009 Back
Retail competition in Scotland was introduced through the Water
Services etc. (Scotland) Act 2005 Back
Q 66 Back
Q 84 Back
Ev 88 Back
Ev w80 Back
Ev w14 Back
Ev w21, w4 Back
Ev 99 Back
See, for example, the discussion in Professor Martin Cave's interim
report on Competition and Innovation in Water Markets, pp 78-80. Back
Q 69 Back
Q 71 Back
Q 69 Back
Q 119 Back
Q 119 Back
Q 324 Back
Water for Life, p70 Back
Ibid, p72 Back
Ev 74 Back
Q 227 Back
Q 222 Back
Q 115 Back
HC (2012-13) 374, para 78 Back
HC (2012-13) 374, para 80 Back
Ev w83; Qq 116-118 Back
See Qq 19-22 and Q 228 Back
Q 326, Q328 Back
Ev w29 Back
Ev w25 Back
Draft Water Bill, p10, para 26 Back
Q 321 Back
Q 36 Back
Q 124 Back
Ev w83 Back
Draft Water Bill, p9, para 24 Back
Q 320 Back
Draft Water Bill, Clause 4 and Schedule 3 Back
See Q 46 Back
Department for Environment, Food and Rural Affairs, Defra's
Strategic Policy Statement for Ofwat: Draft for Consultation,
November 2012, p9 Back
Q 184 Back
Q 143 Back
Ev w48 Back
In December 2012, following the conclusion of our oral evidence
sessions, Ofwat published a consultation on revised proposals
for the modification of company licences which it said would reduce
levels of uncertainty about the impact of the licence changes. Back
Moody's Investors Service Announcement, Continued uncertainty
for UK water sector with proposed licence changes, 29 October
Q 171 Back
Q 185 Back
Q 192 Back
See Ev w87 Back
Ev w59 Back
Q 128 Back
Ev 88 Back
Q 301 Back
Ev w51 Back
Impact Assessment Upstream Competition p49. The impact assessment
considered a range of sensitivities for the increase in the cost
of capital, ranging from 0.5% (low) - 2.5% (high). Defra assumed
a medium financing cost increase of 1% in arriving at the figure
of £426 million. Back
Impact Assessment: Upstream Competition, p33 Back
Ibid. p49 Back
Ev w51 Back
Q 291 Back
Q 293 Back
Ev w45 Back
Ev w17 Back
Ev w28 Back
Q 43 Back
Ev 80 Back
Ev w61 Back
Q 336 Back
Ev w82 Back
Ev 81 Back