Following a “competitive tender process”, Ofwat has appointed KPMG to lead the first leg of its review of credit arrangements in the business retail market.
Ofwat launched the review after some retailers approached the regulator and asked if the current requirements are too stringent and could dissuade smaller, new entrants from competing in the market.
At present, retailers can choose to pre-pay wholesalers for the water their customers use or they can choose to post-pay which includes providing a form of credit.
Ofwat said this form of credit must cover the cost of supplying their customers for 50 days, and if they don’t have the means to do this, wholesalers can choose to no longer work with the retailer.
To make sure the market is effective, Ofwat said it wants to test the current credit arrangements to ensure they are proportionate and targeted and to see if there are better ways to protect customers and make sure the market is dynamic and competitive for retailers.
Emma Kelso, senior director of customers and casework at Ofwat, said: “The purpose of this review is to help us understand how the current arrangements, relating to credit requirements for the business retail market, are working and to examine the options available to remedy any issues which arise.
“In particular, we are keen to understand whether the current arrangements are effectively facilitating new entrants wishing to enter the market.”
Ofwat expects to publish its initial findings from the review and next steps by April 2018.