My Lords, my noble friend would introduce changes to the way in which incumbent water companies’ special charging arrangements for customers operate in the reformed market. Special charging arrangements come about when incumbent water companies depart from published charges schemes to allow discounts on the wholesale element of a water charge where a customer, for example, agrees to do something to reduce pressure on a network or has made a contribution to a capital project carried out by an incumbent.
Amendment 103 would require Ofwat to approve special charging arrangements for licensees before they are put in place. Amendments 44 and 48 remove powers for Ofwat to introduce charging rules under Schedules 2 and 4 that would allow customers who receive discounts to switch to a licensee without losing those discounts. Amendments 106, 131, 166 and 169 will initially require incumbents, within one month of Royal Assent, to notify Ofwat of all existing special charging arrangements that are in place. However, Ofwat already collects and publishes information on special charging arrangements on an annual basis, which means that it is not necessary for the Bill to be changed for Ofwat to obtain details of historical agreements. The amendments would also require Ofwat to make and publish a determination about the appropriateness of these historical charges, publish details of its determination, and control the charges between the incumbent and the licensee as well as the price that the licensee can charge the customer from then on.
As part of the review of price limits for 2015 to 2020, Ofwat requires incumbent water companies to separate out the retail and wholesale components of the charges. Ofwat will be able to assess the appropriateness
of such charges during this process and introduce charging rules under Schedules 2 and 4 to ensure that licensees will be able to access wholesale charges at a competitive rate and compete with incumbents on the retail element of the special charges. For example, rules can ensure that costs are properly allocated between the retail and wholesale elements of the special charge. Ministers will also be able to give their views on the content of charging rules.
Importantly, the change introduced by Clause 33 will place incumbents under an enforceable duty to report new special charging arrangements to Ofwat as soon as they are made. Clause 33 comes into force two months after Royal Assent. This provision also requires Ofwat to publish details of these arrangements in its register, which is available on its website. Taken together, Clause 33 and Schedules 2 and 4 deliver most of what my noble friend wants to achieve through his amendments. Like my noble friend, we want to increase transparency around the setting of new special charges to enable the beneficiaries to be able to switch to a licensee and still retain their discounts on wholesale charges, if appropriate. As part of the price review process for April 2015, when new price limits are introduced, Ofwat will be able to assess the appropriateness of existing special charges ahead of the retail market opening. With these assurances, I hope that my noble friend will feel able to withdraw his amendment.