John Marsh of GTC explains how a new framework could allow independent network operators to provide new water and wastewater connections, providing beneficial market competition for developers.

pril this year saw a significant shake-up of the water market, as competition and choice have been introduced to the last area of utility monopoly — the ownership of water and wastewater networks on new developments.


The changes held out the promise that the housebuilding industry could finally look forward to seeing the water market opening up in the same way as the gas and electricity markets had done 20 years ago, to the great benefit of developers. Today, the majority of new gas and electricity connections are provided by independent network operators, and now the same could be true of new water and wastewater connections.

The framework that was put in place by Ofwat earlier this year supports the devel- opment of genuine competition in the water market. For the first time,

developments and projects of all sizes, rather than just the very largest develop- ments, have the opportunity to choose which network operator to work with for new water and wastewater connections, rather than being obliged to default to the local water company.

Choice generates competition, which can deliver significant benefits to customers, including lower prices, better customer services and innovative supply solutions. Recognising the potential importance of these changes, the HBF set up a committee to consider issues arising from it, and Water UK worked with Ofwat to agree and implement the changes. Now that a few months have passed since these changes came into force, it is a good time to consider their impact.

THE NEW OPTIONS Until April 2018, most housebuilders and developers had very limited choices avail- able when it came to sourcing their new water and wastewater connections. They could obtain the connections from the local incumbent water company, or they could employ a self-lay provider (SLP) to install the site network, which would then be adopted and owned by the local water company. Only for the very largest developments such as King’s Cross or Greenwich Millennium Village was there a third option, to choose a competing water company, referred to as a NAV – ‘New Appointment and Variation.’ NAV licences are the means by which independent water and wastewater operators are licensed by Ofwat to provide services, rather than the incumbent water company, on a per scheme basis. The NAV becomes the water company and replaces the incumbent. NAVs can install the site network or adopt networks installed by SLPs and are then responsible for manag- ing the network and billing customers. Barriers to competition (which Ofwat identified in a 2017 investigation), such as the way in which tariffs for bulk supply and income-offset were calculated by the water companies, meant that it was only finan- cially viable for NAVs to work on the


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