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Ofwat plans greater competition for water companies

Industry regulators, OFWAT, yesterday outlined plans to encourage greater competition in the water market hoping to drive supply costs down whilst improving efficiency.

In part one of a two-part consultation document, the regulator proposed changes to the current water supply licensing rules, in addition to relaxing limits on the number of households eligible to change suppliers.

Ofwat's director of regulatory finance and competition Keith Mason, said: "Competition in other utility sectors has lead to lower bills and improved service."

Backing parliament's approach to industry reform, he continued: "We welcome the Government's commitment to a review of competition and we would like to see the proposals we are making in this paper and the forthcoming paper in spring 2008 taken on board in that review."

High access charges are considered a barrier to new entrants to the water market. Ofwat proposes that the 2,200 customers now eligible to change water supplier should be increased to include around 27,000 non-households, rising to all 1.2 million non-households in the near future.

They also propose greater flexibility in how access prices should be set, but this requires a change to legislation.

In addition to the reforms, the results of a government commissioned pilot scheme on water affordability were also published yesterday.

The scheme, trialled in the South West focused on providing support and information for customers to help identify the most appropriate tariff for those on lower incomes.

The second part of the competition review document is expected in Spring 2008.

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