Water Competition: Back on the Agenda

After two failed initiatives to introduce effective retail market opening into the water and sewerage sector, the Government has now announced a further review of the practicalities of allowing third parties to compete with water undertakers for the provision of water and sewerage services.

Previous attempts have failed for a variety of reasons often linked to the nature of the water sector itself. Chief among these was the "costs principle" on which access prices to the network were based pursuant to the Water Act 2003.

Following rounded criticism of Ofwat's approach to the costs principle by the Competition Appeal Tribunal in the Albion decision on 26 May 2004, Ofwat argued that the costs principle should be abandoned in favour of more general criteria and that primary legislation needs to be changed to tackle the root of the issue.