Market Blueprint

Market Blueprint
We are seeking stakeholders views on the questions set out in this

consultation document. If you have any comments on the paper
please contact: feedback@open-water.org.uk
Publication Date: 2 January 2014
Response deadline: 14 February 2014
Contents
1. Executive summary
1.1 Introduction
1.2 Scope of retail market reform
1.3 Recommended market arrangements for water and sewerage
1.4 Recommended market arrangements for trade effluent
1.5 Recommended market arrangements for developer services
1.6 Recommended market arrangements for subcontracted and associated

services
1.7 Registration and switching strategy
1.8 Financial settlement strategy
10
1.9 Operational services strategy
11
1.10 Market operator target operating model
12
1.11 Systems architecture and data model
13
1.12 Next steps
13
2. Introduction
14
2.1 Programme background
14
2.2 Document purpose and context
14
3. Scope and vision for retail market reform
17
17
3.2 Vision and success criteria of retail market reform
19
3.3 Key perceived issues retail market reform seeks to address
19
4. Market arrangements for water and sewerage
21
4.1 Current market arrangements in England and Wales
22
4.2 Current market arrangements in Scotland
23
4.3 Future market arrangements in England
24
4.4 Evolution of WaSC and WOC arrangements
32
4.5 Evolution of NAV arrangements
34
4.6 Evolution of WSL arrangements
34
4.7 Evolution of private supply, on-site disposal, and self-supply arrangements

36
5. Market arrangements for trade effluent
38
38
39
5.3 Future market arrangements in England for new consents and agreements
40
5.4 Future market arrangements in England for existing consents and
agreements
42
6. Market arrangements for developer services
43
44
45
6.3 Future market arrangements in England for new developments
49
6.4 Future market arrangements in England for completed and in-progress

developments
52
7. Market arrangements for subcontracted and associated

services
54
7.1 Present and possible future subcontracted and associated services
54
7.2 Assumed market arrangements
55
8. Market strategy and high-level design
57
8.1 Structure of the market strategy and high-level design
57
57
60
8.4 Metering strategy
61
62
8.6 Market governance and performance management strategy
62
8.7 Customer contracts and tariffs strategy
63
8.8 Wholesale contracts strategy
63
63
65
8.11 Codes architecture
66
8.12 Upstream considerations
66
Appendix A: Consultation questions and approach
67
Consultation questions
67
Consultation approach
68
Appendix B: Glossary of terms
70
Appendix C: Customer expectations assessment
71
Appendix D: Working group comments
72
Appendix E: Market consistency assessment
76
Consistency with the Scottish market
77
Consistency against other criteria
81
1. Executive summary
1.1 Introduction
The UK Governments Water Bill1 is designed to address the current and future
challenges faced by the water and sewerage sector. One of the key reforms proposed
is the introduction of retail competition for water and sewerage services to nonhousehold customers in England, which will be in place from April 2017.
This market blueprint describes the:
present and recommended future market arrangements; and
different roles in the new market arrangements.
It also summarises our recommended high-level market design.
In creating the design, we have reviewed and considered the market designs and
associated codes for, and met market participants from, the:
Irish and British electricity markets;
British gas market; and
Scottish water market.
We have also met with market operators and experts in these markets such as Ofgem,
the Scottish Central Market Agency (CMA), the Water Industry Commission for
Scotland (WICS), Elexon and Electralink.
The design recommendations set out in this document have been developed with
consideration of their impact on and response to wider issues, including how they
would:
ensure a level playing field for market participants;
support market consistency both within England and between the English market
and the markets in Wales and Scotland;
reflect customers expectations of how they hope to see the retail market operate;
align with the later introduction of upstream markets; and
strike an appropriate balance between scale and complexity, deliverability and the
benefits they will generate.
The recommendations in this document are intended to facilitate wider discussion
about the changes. Following a period of consultation, updated recommendations will
act as a recommendation to Ofwat. It should be noted that many of the
recommendations in this document potentially relate to areas that fall within Ofwats
regulatory remit (for example, areas of market governance or the possible content of
the market codes), and will require a regulatory decision in due course.

The scope of retail market reform as outlined in this market blueprint is set out below.
Water Bill 2013-14. http://services.parliament.uk/bills/2013-14/water/documents.html
Services
provided to
customers
In scope
Out of scope
Water, encompassing:
potable water; and

non-potable water.
Sewerage services,
encompassing:
foul water;
surface water drainage; and
trade effluent.
Developer services.
Wholesale
services provided
to retailers
Commodity and network

services (where bundled into a
single product).
Operational services.
Commodity and network

services (where provided
individually/not bundled into a
single product).
Highway drainage (these costs
are assumed to be socialised in
commodity and network
services).
Customers
All non-household customers.
All household customers.
Developers and self-lay

operators (SLOs).
Any legally permitted reselling

of in-scope services by a
customer.
Geography
Customers receiving services

from water companies that are
wholly or mainly in England.
Customers receiving services

from water companies that are
wholly or mainly in Wales or
Scotland.
Timeframe
Market operations from April

2017 onwards.
Market operations before April

2017.
1.3 Recommended market arrangements for water and

sewerage
1.3.1 Customer choice
Customers will be able to choose their retailers for water and sewerage services. We
recommend that the base unit for all switching activity should be the service type at
individual premises. The service types in the water and sewerage markets are potable
water, non-potable water, foul water, surface water drainage, and trade effluent.
We recommend that legacy special agreements are split into a wholesale element and
a retail element to enable the customer to be able to change retailer from 1st April 2017.
1.3.2 WaSC, WOC and NAV evolution

Water and sewerage companies (WaSCs), water only companies (WOCs) and new
appointments and variations (NAVs) will continue to provide both retail and wholesale
functions within their area of appointments. They may also choose to set up their own
competitive retail arm, seeking to acquire customers outside of their area of
appointment.
WaSCs, WOCs and NAVs will be required to provide wholesale services to their own
incumbent retailer and new entrant retailers on a non-discriminatory basis.
The obligations set out in legislation and licences which WaSCs and WOCs have will
continue. WaSCs and WOCs will need to continue to satisfy themselves that they are
complying with their licence obligations and other statutory obligations.
1.3.3 WSL evolution

The water supply licensing (WSL) retail only arrangements will evolve directly into the
new retail market arrangements. The WSL combined supply licence arrangements will
be unbundled into two elements:
a retail element; and
an upstream element.
The retail element will be managed in the same way as the retail only arrangements.
The management of the upstream element will be outside the scope of the retail
market; service points served under such an upstream agreement should be required
to be registered with the market, but the financial settlement and managing of
operational services should be administered bilaterally.
1.3.4 Market operator

A new market operator (MO) should be created, providing services in the areas of:
registration and switching;

financial settlement;
market governance; and
industry data exchange.
1.4 Recommended market arrangements for trade

effluent
1.4.1 Consents and permits
Consents should be granted by the wholesaler, and should continue to relate to the
premises and occupier, and not the retailer. The customer should be required to apply
for the consent through their chosen retailer of trade effluent services. Incumbent
retailers will be obliged to offer a consent application handling service, and new entrant
retailers should be permitted to choose whether they offer this service.
The wholesaler should not be permitted to communicate with the customer directly
during the application process, except on matters related to compliance and
enforcement.
The Environment Agency (EA) will continue to grant permits for discharge into the
watercourse. The customer will be required to interact directly with the EA.
1.4.2 Charging
The wholesaler should charge the retailer, and the retailer should charge the customer,
adding in a retail margin. The standard billing frequency and payments terms should be
as for other sewerage services.
1.4.3 Compliance and enforcement

The undertaker will continue to have an obligation to take and analyse samples of
waste discharged from premises to ensure compliance with consents, and we
recommend that this is a wholesaler responsibility.
If the retailer requires additional sampling and analysis for the purposes of customer
billing, we recommend that this should be the responsibility of the retailer. However,
they should have choice over who they contract with to do this work, but the wholesaler
should be required to offer their trade effluent sampling and analysing services on a
reasonable and non-discriminatory basis.
1.4.4 Existing agreements

Customers that have existing trade effluent agreements will be allowed to change
retailer from
1st April 2017. On retail market opening these customers should continue to be served
by the incumbent WaSC retailer until such time that they choose to change. Existing
trade effluent charging agreements should be split into a wholesale element and a
retail element (margin).
1.5 Recommended market arrangements for developer

services
1.5.1 Roles in the developer services market
We recommend that developers interact with retailers of developer services, and that
the following organisations should be able to enter this market.
Incumbent non-household retailers of water and/or sewerage (with an obligation to
provide such services).
New entrant water and/or sewerage retailers.
New entrant specialised developer service only retailers such as SLOs or
developers themselves.
We recommend that Ofwat considers how to enable organisations such as SLOs and
developers to act as a retailer of developer services (without being a water and/or
sewerage retailer), with suitable controls and governance (such as accreditation), but
without undue burden or complexity (such as licencing).
We recommend that the provision of developer services to a developer should be a
separable service to the provision of water and sewerage services.
1.5.2 Administration and customer service activities

The retailer of developer services should be responsible for administration and
customer service related to developer services, irrespective of whether the
development is household, non-household or mixed.
Registering new sites should be the responsibility of the retailer of developer services,
not the wholesaler.
1.5.3 Planning, design, and engineering works

Responsibilities and options to use SLOs and contractors will remain unchanged.
Interactions between the developer and wholesaler should be through the retailer of
developer services.
1.5.4 Payment handling

The retailer of developer services should handle all payments, irrespective of whether
they come from the developer or to the developer.
If the option for payments related to developer service works take the form of
repayment over a period of up to 12 years remains, the developer should not be
permitted to change the retailer of developer services they interact with for a particular
site during the repayment period.
1.5.5 Completed and in-progress developments

For developments that are part-way through to completion, and for charging
arrangements and financial payments being made that relate to developments
completed before 1st April 2017 but where the payment schedule extends beyond 1st
April 2017, the relationship should transfer to the incumbent non-household retailer on
1st April 2017.
The developer should not be permitted to switch to another retailer of developer
services for payment arrangements related to completed developments.
1.6 Recommended market arrangements for

subcontracted and associated services
1.6.1 Market interactions with organisations
Organisations providing sub-contracted and associated services for example, meter
reading and water retailer recommendations should interact by default with the
market and the MO through the party on whose behalf they are working/who appointed
them.
1.6.2 Market operator constraints

The MO should not be permitted to offer sub-contracted and associated services. It
should be permitted to negotiate bilateral access agreements to MO systems and
market data on a commercial basis with organisations providing such services.

1.7.1 Customer choice
Customers will be able to choose their retailers for water and sewerage services, and
we recommend that the base unit for all switching activity should be the service type at
individual premises (see section 1.3.1 for more detail).
1.7.2 Creation of a central register

There will be a central register of service points in the market, which the MO will host
and maintain. The register should be developed principally from national datasets,
against which incumbent water companies should be required to map their existing
service point information.
1.7.3 Customer awareness

We recommend that there should be a centralised marketing campaign to raise
customers awareness of switching, complemented by retailers direct marketing
activities. This campaign should not be delivered by the MO, but should be enabled by
Ofwat and involve a range of organisations, including retailers and customer
representative bodies.
We hope that new providers will emerge to provide retailer and tariff comparison and
advice services to customers. The MO will not provide such services.
1.7.4 The switching process

We recommend that there should be a standard switching process. The new retailer
should initiate switch requests and then lead the administration of the switch, with
messages between participants passed through the MO. Where a customer moves to a
new premises, they should continue to be served by the retailer who has been serving
the service point(s) (under a deemed contract) until the customer requests otherwise.
The switch process should incorporate a customer cooling off period, and a time
window to allow the new retailer to cancel, or the current retailer to object. Objections
should be handled after the customers switch request is submitted, rather than before,
and there should be a defined set of objection reasons. We recommend that a new
retailer should be able to refuse a customer request to switch to them such that
retailers have scope to specialise in segments of the market.
There should be a maximum standard timescale for switches to take effect. In addition,
a customer should be able to select an alternative date beyond this within a specified
window.
We recommend to Ofwat that a new retailer should be able to refuse a customer
request to switch to them, but that there should be a defined set of reasons that cannot
be used to refuse to request an application. Retailers should have an enduring
responsibility to serve their customers until they choose to switch again.

1.8.1 Timing and frequency of settlement
Ofwats information notice published in November 20132 sets out that the settlement
period will be one calendar day and the billing period will be one calendar month for all
services.
We recommend that initial settlement calculations for a billing period (calendar month)
should be issued five business days after the end of the billing period, two resettlement
runs, two and eight months after initial settlement, with full and final settlement after 13
months.
2
Available at: http://www.ofwat.gov.uk/competition/review/prs_in1321pr14paymentterms.pdf
10
1.8.2 Payment terms and credit requirements

Ofwats information notice published in November 2013 sets out that standard payment
terms are 30 days from the last day of the billing period, or 15 days after the invoice is
deemed to be received, whichever is the later, and that a retailer needs to have either a
letter of credit from a guarantor with a defined minimum credit rating, or an agreement
with a wholesaler to use an escrow account.
We recommend that the credit rating requirement for standard payment terms should
be the minimum investment grade rating.
Market participants may negotiate non-standard payment and credit terms. To ensure
transparency and a level playing field, we recommend that there should be a
requirement to publish details of such agreements and to make them available to all
other market participants.
1.8.3 Settlement and estimation calculation approach

The charges due will be based on wholesale charges schemes.
Non-daily metered service points should have an estimate of annual consumption (the
yearly volume estimate or YVE), and be allocated to a standard consumption profile.
These should then be used to estimate consumption for each day/settlement period.
1.8.4 Roles and responsibilities in settlement

The party providing the service should be responsible for determining how much
service has been provided, including taking meter readings.
The MO should make any adjustments necessary to consumption data, including
estimating usage, and determine charges due between market participants.
The party providing the service will be responsible for billing and collections.

1.9.1 Standardised operational services catalogue
A catalogue of operational services provided across England should be created, and
we will seek to make the definition of services consistent.
1.9.2 Standardised service levels

Ofwat will carry out work on service levels. To help inform that work, Open Water will
carry out an information gathering exercise to establish how consistent service levels
already are.
We recommend that the MO should collect and publish information on service
performance.
1.9.3 Negotiating non-standard services and service levels

We recommend that market participants should be able to negotiate non-standard
services and/or service levels. We recommend that Ofwat should consider a
requirement to publish details of such agreements.
11
1.9.4 Administering service requests and notifications

All standard, and where possible non-standard, service requests and notifications
should be communicated between market participants through the MO.

Note: Ofwat will be carrying out work related to the MO delivery, ownership and
governance, and commercial model. Items presented below against those headings
are recommendations to Ofwat:
1.10.1 Services provided

A new MO should be created, providing services in the areas of;
registration and switching;

financial settlement;
market governance; and
industry data exchange.
1.10.2 Requirement to use market operator services

To achieve a level playing field we recommend to Ofwat market participants should be
required to make use of the MO services for standard services, agreements and
interactions, including where the parties interacting are related for example, when the
incumbent wholesaler and incumbent retailer are interacting. We recommend that
Ofwat should put in place a process to allow participants to request dispensation from
this requirement.
Non-standard agreements and interactions where the MO cannot provide its standard
services without changing its processes and systems should be managed bilaterally.
1.10.3 Delivery model

There should be a single MO. The MO should in-source/build capabilities associated
with:
strategy;
procurement and contractor management;
business operations; and
market governance and MO change management.
It should outsource/procure capabilities associated with:

IT system build, operate and change; and
market operations.
1.10.4 Ownership and governance model

The MO should be a company limited by guarantee. It should be owned by market
participants, and governed by an independent board.
1.10.5 Commercial model

The MO should be a not-for-profit entity funded on a cost recovery basis from
members/owners. Set-up costs should be paid by wholesalers (in a manner which does
12
not impact household customers), and operational costs 50% by wholesalers and 50%
by retailers. Costs for individual companies will be proportionate to their size, primarily
assessed through the number of service points.

1.11.1 Industry data exchange hub interface approach
An industry data exchange (IDEX) hub should be created, through which market
participants will send and receive data. Three types of interface should be implemented.
An automated interface for machine-to-machine communication.
A semi-manual interface for participants to upload/download data files to/from
manually.
A manual interface such as set of secure web forms.
1.12 Next steps

We are seeking feedback on the recommendations outlined in this document. Details
on how to provide feedback are included in appendix A.
A future iteration of the high level design will be published in early summer 2014. This
will include updates following review of feedback provided, and additional content in the
areas of:
metering strategy;
customer contracts and tariffs strategy;
wholesale contracts strategy; and
upstream considerations.
Additionally, we understand Ofwat will be carrying out work in the following areas,
which we will seek to input to, and ensure our recommendations align with:
market governance and performance management strategy; and
codes architecture.
13
2. Introduction
2.1 Programme background
The UK Governments Water Bill3 was introduced into Parliament and published on
27th June 2013. The Water Bill is designed to address the current and future challenges
faced by the water and sewerage sector, which were described in the Water White
Paper4.
Among other things, the Water Bill is designed to:
increase customer choice;

improve service provision;
stimulate innovation; and
drive more sustainable approaches to managing our scarce resources.
The Governments key reforms are:

the introduction of retail competition for water and sewerage services to nonhousehold customers in England, which will be in place from April 2017; and
the introduction of competition in the upstream sector, which will take place at a later
date (after 2019).
The Open Water programme has been created to facilitate the implementation of the
proposed reforms.
2.2 Document purpose and context

This document is part of a suite of materials being published throughout 2014. They set
out the Open Water programmes recommendations for the high-level design for the
new competitive water retail market for non-household customers in England. These
materials are:
this market blueprint, which describes the present and future market arrangements
and the different roles in the new market arrangements, and summarises the
programmes recommendations for the high-level market design;
a series of documents on strategy and high-level design, which present in more
detail the programmes recommendations in areas such as registration and
switching, financial settlement, and industry governance and performance
management; and
supporting discussion papers and option analyses, which have informed the
documents listed above.
The intended audiences for the high-level design papers are:
the strategy, regulation and change teams within incumbent and new entrant water
companies in England;
Ofwat;
potential providers of services and systems to a new central Market Operator and/or
to water companies; and
Water Bill 2013-14. http://services.parliament.uk/bills/2013-14/water/documents.html

Water for Life Market reform proposals. https://www.gov.uk/government/publications/waterfor-life-market-reform-proposals
4
14
anyone with an interest in the reform of the water industry.

This document is structured as follows,
The vision and objectives of market reform (chapter 3.
An overview of the current market arrangements, detail of the recommended future
market arrangements, and detail as to how companies and customers will be
transitioned from the present arrangements to future arrangements (chapters 4-7).
The strategy and high level design to deliver the new market arrangements
(chapter 8.
The design recommendations set out in this document have been developed with
consideration of their impact on and response to wider issues, including how they
would:
ensure a level playing field for market participants;
support market consistency both within England and between the English market
and the markets in Wales and Scotland;
reflect customers expectations of how they hope to see the retail market operate;
align with the later introduction of upstream markets; and
strike an appropriate balance between scale and complexity, deliverability and the
benefits they will generate.
In creating this document, the Open Water team has reviewed and considered the
market designs and associated codes for, and met market participants from, the:
Irish and British electricity markets;
British gas market; and
Scottish water market.
We have also met with market operators and experts in these markets such as Ofgem,
the CMA, WICS, Elexon and Electralink.
The recommendations set out in this document have been discussed with:
an industry working group;

Ofwats Choice and Trading Arrangements Programme Board members;
Open Waters Programme Delivery Board; and
Open Waters High Level Group.
Feedback from these groups has been considered and reflected in the proposals
made.
Throughout this document we ask a number of questions and seek stakeholders views
on these. We list all of the questions in appendix A. Please provide your responses to
the consultation questions and any other comments or queries you may have regarding
this paper by 14th February 2014, to feedback@open-water.org.uk. We provide an
accompanying template for responses on the Open Water website to help this process,
which we strongly encourage respondents to use. We will, however, accept responses
in other formats if necessary.
We will be running a workshop on 29th January for representatives from water
companies to discuss the content presented in all of the high-level design papers.
Details of this session have been shared with water companies, and for more
information please contact feedback@open-water.org.uk.
A second iteration of this document will be issued in early summer 2014. This will
include any changes necessary to align with additional strategy and high-level design
15
papers which will be produced in early summer 2014, and will also reflect any changes
made in response to consultation responses received.
The recommendations set out in this document are intended to facilitate wider
discussion about the changes. Following the consultation, the updated
recommendations will act as a recommendation to Ofwat, for the relevant regulatory
decisions in due course.
16
3. Scope and vision for retail

market reform
The scope of Open Water and the market arrangements and market design set out in
this document is the introduction and operation from April 2017 of a competitive
retail market for water and sewerage services, serving English non-household
customers. We define this in more detail below. Of course, there are nuances to this
scope, and we discuss these in more detail in later chapters of this document and in
the supporting design materials.
3.1.1 Services provided to customers

The scope of Open Water and this market blueprint encompasses the provision of the
following services to customers.
Water5, encompassing:
o potable water; and
o non-potable water.
Sewerage services, encompassing:
o foul water;
o surface water drainage; and
o trade effluent.
Developer services.
In the future, further services related to an upstream market may be introduced, but at
this time these are not defined as being in scope.
3.1.2 Wholesale services provided to retailers

The scope of Open Water and this market blueprint encompasses the provision of the
following services by wholesalers to retailers.
Commodity and network services (sometimes called direct services), such as
providing water or disposing of foul water.
Operational services (sometimes called indirect services), such as exchanging a
meter or repairing a burst water main.
Other services that the wholesaler performs but which are not directly and identifiably
billed to customers at present are outside the scope of Open Water and the market.
For example, where a sewerage company treats and disposes of water from highway
drainage, this will not be a service within the scope of the market; instead, the cost of
providing this service would be socialised and recovered through other services that
are within the scope of the market.
In the future, further services related to an upstream market may be introduced, but at
this time these are not defined as being in scope.
This includes water provided for the purposes of firefighting, even if it is supplied through a
dedicated firefighting service point.
17
3.1.3 Customers
The scope of Open Water and this market blueprint encompasses non-household
customers that currently receive their services through the water supply and/or
sewerage system of an undertaker that operates wholly or mainly in England; and
developers, as customers of developer services from water and sewerage companies.
We recognise that in some circumstances the distinction between household and nonhousehold is not clear for example, whether a show home on a new housing
development is a household premises or not. Ofwat will be issuing more detailed
eligibility guidance which seeks to address these areas of ambiguity.
If a customer re-sells any of the in-scope services, then the party that pays the water or
sewerage company is considered the customer and hence within scope of the market,
and the party onto which they sell the service are outside the scope of the market. For
example, if a commercial property firm sells on water to their tenants, the property
company is considered a customer within the market, and the tenants are not.
3.1.4 Geography
The scope of Open Water and this market blueprint includes the English water market,
which encompasses water companies that operate wholly or mainly in England.
The scope of Open Water explicitly excludes water companies that operate wholly or
mainly in Wales. While the Water Bill will result in changes for some Welsh customers
and the operation of the Welsh market, delivering these changes is not within the
scope of Open Water and, accordingly, is not described in this market blueprint.
Similarly, market operations now or in the future related to the WSL arrangements for
the Welsh market are not within the scope of Open Water.
As a consequence of the differing policies being introduced for the English and Welsh
markets, it should be noted that a customer may be within the scope of the market
described in this blueprint for some services but not all for example, a customer that
receives their water from an English-administered water company and sewerage
services from a Welsh-administered water company.
The scope of Open Water also explicitly excludes Scottish water companies and
customers. In producing this market blueprint, we have sought to ensure an
appropriate level of consistency with the Scottish market to help improve customer
experience. However, for the avoidance of doubt, this document only describes the
design for the English water retail market. It is for the Scottish Government and WICS
to advise on the future plans for the Scottish market.
3.1.5 Timeframe
The operation of the market from April 2017 onwards is within the scope of Open Water
and this market blueprint.
The operation of the existing competitive WSL and NAV frameworks, and introducing
any possible enhancements before April 2017 to those frameworks, are explicitly out of
the scope of Open Water and this document.
Consultation question:
BP 3a: Do you agree with the recommended scope of the English non-household retail
market?
18
3.2 Vision and success criteria of retail market reform

The content presented in this market blueprint is intended to reflect the Open Water
programme vision that Ministers have agreed with the High Level Group. The vision is
that:
the Market Reform Programme has been created to support delivery of the UK
Governments vision for the future of water management in England, set out in the
Water White Paper;
we want to support a resilient water sector, in which water companies are more
efficient and customer focused, and in which water is valued appropriately;
we will improve the range and quality of services offered to customers by removing
barriers to competition, fostering innovation and efficiency, and encouraging new
businesses to enter the market;
we will create markets where all participants operate on a level playing field; and
our reforms will drive more sustainable use of resources and keener pricing for
customers.
The agreed over-arching success criteria for the Open Water programme are that:
all non-household customers are in a position to negotiate better targeted, more
efficient and more cost effective services;
outcomes are cost-beneficial for most customers;
the new competitive markets are fair, transparent and efficient;
the market delivers a seamless customer experience in England and Scotland;
reform incentivises innovation by both existing and new market participants; and
reforms to upstream markets in England drive sustainable and efficient use of water,
encouraging innovation and choice in alternative water resources and sewerage
services.
3.3 Key perceived issues retail market reform seeks to

address
The current market structure in England and Wales is widely perceived to experience
the following problems.
From a customer perspective, water companies are considered to be less innovative
and providing lower levels of customer service and focus compared with companies in
other sectors, and customers are not receiving the level of support and encouragement
they would like in managing their water consumption. In addition, customers with a
multi-regional presence have to interact with a number of water companies, which can
be inefficient and time consuming.
From the perspective of new retailers, the current framework requires them to agree
prices on an individual basis with the incumbent water companies, which can be
burdensome and time consuming.
From a regulatory/legislative perspective, it is thought that the lack of competition is
resulting in lost opportunities to drive efficiencies and improve service. In particular, the
following are perceived issues with the present WSL framework.
The small size of the WSL market and the small number of customer who have
switched retailer.
The requirement on a party wishing to provide upstream services to the WSL market
to also provide the associated retail services.
19
The absence of arrangements equivalent to WSL for the sewerage value chain.
The costs principle (the current approach to access pricing), which restricts available
margins.
20
4. Market arrangements for

water and sewerage
Key recommendations made in this chapter
Customer choice: Customers will be able to choose their retailers for water and
sewerage services. We recommend that the base unit for all switching activity should
be the service type at individual premises. The service types in the water and
sewerage markets are potable water, non-potable water, foul water, surface water
drainage, and trade effluent.
We recommend that legacy special agreements are split into a wholesale element and
a retail element to enable the customer to be able to change retailer from 1st April
2017.
WaSC, WOC and NAV evolution: WaSCs, WOCs and NAVs will continue to provide
both retail and wholesale functions within their areas of appointment. They may also
choose to set up their own competitive retail arm, seeking to acquire customers outside
of their area of appointment.
WaSCs, WOCs and NAVs will be required to provide wholesale services to their own
incumbent retailer and new entrant retailers on a non-discriminatory basis.
The obligations set out in legislation and licences which WaSCs and WOCs have will
continue. WaSCs and WOCs will need to continue to satisfy themselves that they are
complying with their licence obligations and other statutory obligations.
WSL evolution: The WSL retail only arrangements will evolve directly into the new
retail market arrangements. The WSL combined supply licence arrangements will be
unbundled into two elements: a retail element, and an upstream element.
The retail element will be managed in the same way as the retail only arrangements.
The management of the upstream element will be outside the scope of the retail
market; service points served under such an upstream agreement should be required
to be registered with the market, but the financial settlement and managing of
operational services should be administered bilaterally.
Market operator: A new MO should be created, providing services in the areas of
registration and switching, financial settlement, market governance, and industry data
exchange.
To achieve a level playing field, we recommend to Ofwat that for standard services,
agreements and interactions, market participants should be required to make use of
the MOs services, including where the parties interacting are related for example,
when the incumbent wholesaler and incumbent retailer are interacting. We recommend
that Ofwat should put in place a process to allow participants to request dispensation
from this requirement.
Non-standard agreements and interactions where the MO cannot provide its standard
services without changing its processes and systems should be managed bilaterally.
21
4.1 Current market arrangements in England and

Wales
At present, the water and sewerage markets in England and Wales comprise:
19 large vertically integrated regional monopoly providers;
a small number of companies providing water and sewerage services to specific
sites; and
a small number of retailers providing water to the largest non-household customers.
The diagrams below illustrate the water and sewerage6 supply chains for nonhousehold customers and the different market arrangements that exist today. We then
provide further explanation of them.
Water
Supply Chain
Abstraction
Large
Incumbent
Monopoly
Providers
Distribution
Retail
Business
Customers
Water and Sewerage Companies (WaSCs)

Business
Customers
Water only Companies (WoCs)
Site-Specific
Monopoly
Providers
Water Supply
Licensee
Providers
Storage &
Treatment
New Appointment or Variation Companies (NAVs)

Business
Customers
WSL Retail Only Lic.
Undertaker
WSL Combined Supply Licensee
Undertaker
WSL Comb. Supp. Lic.
Secondary Undertaker
Primary Undertaker
Business
Customers
Figure 1: Water supply chain and present non-household market arrangements in England and Wales
Sewerage
Supply Chain
Large
Incumbent
Monopoly
Providers
Site-Specific
Monopoly
Providers
Disposal
Treatment (Sewage
& Sludge)
Collection &
Transportation
Retail
Business
Customers
Business
Customers
New Appointment or Variation Companies (NAVs)

Business
Customers
Figure 2: Sewerage supply chain and present non-household market arrangements in England and Wales
Most non-household and other business customers in England and Wales are served
by large incumbent monopoly providers, comprising:
ten vertically integrated, regional monopoly water and sewerage companies
(WaSCs); and
nine vertically integrated, regional monopoly water only companies (WOCs).
The new appointment or variation (NAV) arrangement, often referred to as the inset
framework, allows for an alternative company to provide water and sewerage services
Excluding trade effluent, which is explained in more detail in chapter 5.
22
for a specific site or area. These may, as shown in Figure 1 and Figure 2, manage the
full end-to-end water supply chain, or they may purchase wholesale services from the
neighbouring WaSCs and/or WOCs. Currently, there are five such companies
operating in England and Wales.
The water supply licensing (WSL) arrangements allow for large users of water that is,
those that use more than 5 million litres of water a year in England or 50 million litres of
water a year in Wales to change their water retailer. The WSL arrangements do not
allow for a customer to change their sewerage service retailer. From a market design
perspective, there are three main variants of the WSL framework. These are:
retail only, where the water supply licensee purchases a wholesale supply of water
from the local WaSC or WOC and retails it to customers. Currently, there are eight
water supply licensees offering water to non-household customers on a retail only
basis;
combined supply, where the water supply licensee, in addition to providing retail
services to the customer, introduces water into the undertakers system sufficient to
meet their customers needs. There are currently no combined supply agreements in
operation in England or Wales; and
secondary supply, which is a variant of the combined supply arrangements, where
instead of introducing water into the undertakers system themselves, the water
supply licensee appoints a neighbouring undertaker (the secondary undertaker) to
introduce the water into the primary undertakers system. There are currently no
combined supply agreements with secondary supply in operation in England or
Wales.
Under all of these arrangements it is possible that, for a particular site, the end
consumer of the water or sewerage services is not the party responsible for paying the
bill to the water company, and hence that water and sewerage services are being
resold. For example, the owner of a shopping centre may purchase water from a water
company, which they then sell on to the tenants of individual stores. In the present
market arrangements, this re-selling is by the Water Resale Order, and for the
purposes of this market blueprint, the party paying the bill to the water or sewerage
company is the customer.
A number of customers have private water supplies such as an on-site bore hole, and
on-site sewerage storage and treatment such as a septic tank. These arrangements
are regulated by local authorities and the Environment Agency respectively, and
customers have complete choice about which companies they engage with to provide
such services.

The Scottish market has developed independently of the English and Welsh markets,
as water industry and environment law are wholly devolved.
The diagram below illustrates the water and sewerage7 supply chains for nonhousehold customers and the associated companies in Scotland. We then provide
further explanation.
77
23
Excluding trade effluent, which is explained in more detail in chapter 5.
Water
Supply Chain
Abstraction
Sewerage
Supply Chain
Disposal
Water and
Sewerage
Companies
Market
Facilitation
Organisations
Storage &
Treatment
Treatment (Sewage
& Sludge)
Distribution
Collection &
Transportation
Wholesaler (Scottish Water)
Retail
Retail
Business
Customers
Retailers
Business
Customers
Market Operator (CMA)
Figure 3: Water and sewerage supply chains and present non-household market arrangements in
Scotland
There is a single wholesaler, Scottish Water, which is responsible for providing all
water and sewerage services to non-household retailers.
Retail competition for all non-household customers has been in place since 2008. No
threshold for switching retailer exists; therefore, any non-household customer in
Scotland can switch their water and/or sewerage services to another retailer. For a
single premises, the customer can switch all of their water services to a new retailer,
but cannot switch potable and non-potable supplies to separate retailers. Similarly, for
a single premises, the customer can switch all of their sewerage services to a new
retailer, but cannot switch foul water, surface water drainage and trade effluent to
separate retailers. If a building has multiple occupants, it is defined as multiple
premises (one for each occupier) and, accordingly, each occupier can choose their
water and sewerage retailers.
There are now 13 licenced retailers in the Scottish water and sewerage market. Since
the market opened, about 5%8 of the market has switched retailer and about 50%9 of
the market has renegotiated their water and sewerage services.
There is a single market operator, the Central Market Authority (CMA), which
administers the market. They:
maintain a record of which retailer is responsible for serving each customer;
determine the charges that retailers must pay Scottish Water; and
chair the technical panels that administer the codes which describe and govern the
market.
4.3 Future market arrangements in England

Reforming the water and sewerage markets will be carried out in the following two
phases.
Phase 1 will involve introducing retail market competition, with the planned date for
retail market opening being 1st April 2017. We discuss the retail market
arrangements in sections 4.3.1 4.3.3 below.
8
9
Source: Water Industry Commission for Scotland.

Source: Business Stream.
24
Phase 2 will include upstream reform, which will follow retail market opening at a
later date (after 2019). We discuss the outline upstream market arrangements in
section 4.3.4 .
4.3.1 Retail market arrangements

From 1st April 2017, a new retail market for water and sewerage services will be
introduced in England. The key characteristics of the new market are that:
all non-household customers will be able to change their retailer(s) for water and
sewerage services, or they can choose to self-supply;
incumbent WaSCs, WOCs and NAVs will continue to provide both retail and
wholesale functions within their area of appointments, but a level of separation will
be required between retail and wholesale functions10; and
regulated access to wholesale water and sewerage services will be introduced,
replacing the present negotiated access arrangements, and encouraging new
retailers to enter the market.
The diagram below illustrates the water and sewerage supply chains for non-household
customers and (in their simplest form) the new market arrangements that will exist from
1st April 2017. We then provide further explanation, and in later sections describe in
more detail some of the intricacies for WaSCs, WOCs, NAVs and WSLs.
Water
Supply Chain
Abstraction
Sewerage
Supply Chain
Disposal
Water and
Sewerage
Companies
Storage &
Treatment
Treatment (Sewage
& Sludge)
Distribution
Collection &
Transportation
Retail
Retail
Business
Customers
Retailers
Wholesalers
Self-Supply Licencee
Wholesale Market
Business
Customers
Retail Market
Figure 4: Water and sewerage supply chains and non-household market arrangements in England from 1
April 2017
st
Wholesalers, which includes the existing WaSCs, WOCs and NAVs, will be responsible
for providing water and/or sewerage services within their area of appointments to
retailers. Access to wholesale services will be on the basis of regulated access that is,
the cost and service level offered by wholesalers to all retailers will be regulated and
not negotiated as it is currently with the WSL framework.
Retailers will purchase water and sewerage services from wholesalers, and then sell
them on to customers. Default customer tariffs will be implemented for those customers
served by incumbent retailers, operating on the basis of minimum service levels and
maximum prices. Retailers will be free to offer innovative alternative tariffs, products
and services to customers. The retailers in the market will include:
incumbent retailers, including the existing WaSCs, WOCs and NAVs, acting as the
default retailer for customers within their area of appointment; and
10
Ofwat is currently consulting on the level of separation required/proposed by water

companies.
25
new entrant retailers, including the competitive retail arms of any existing water
companies operating anywhere in the country, and any other new market entrants.
water, non-potable water, foul water, surface water drainage, and trade effluent. As a
result, a customer would be able choose to have different retailers for each service
type at each premises, or they may choose an offer which bundles services across
types and premises, which we expect to be offered by retailers. The key reasons for
this recommendation11 are that it should:
promote competition and potentially provide a greater choice of retail services,
innovation and specialist retailers, meeting Defras stated aim to allow new entrants
to be able to offer specialised services and enable all new entrants to specialise in
the services they wish to provide 12; and
ensure the market design is adaptable to the development of the upstream market,
through retail service alignment to upstream commodities.
Where services cannot be separately delivered, measured and charged for example,
if foul water and surface water drainage are combined then the customer should be
able to choose their water retailer for all water services and sewerage retailer for all
sewerage services
Alternatively, customers may choose to become a self-supply licensee; instead of
purchasing water and sewerage services from a retailer, they can purchase directly
from the wholesaler. In essence, they become a retailer, but one that can only supply
their own site(s) or those of their associate(s).
New entrant water companies will operate using new licences, which Ofwat will grant13,
with authorisations that describe the activities they can perform in the market. The
authorisations, with separate versions for water and sewerage, are14:
wholesale authorisations, allowing water to be input into an incumbent water
companys network; and
retail authorisations, enabling new entrants to provide customer-facing services.
With respect to the markets, in this document:
the retail market relates to activities between the customer and the retailer.
Reselling water by the customer, where legally permitted, is governed by the Water
Resale Order and is outside the scope of the retail market; and
the wholesale market relates to interactions between retailers and wholesalers.
4.3.2 Allocating existing activities to wholesale and retail

Introducing retail competition will result in activities which are currently performed by
the incumbent monopoly providers being performed by different parties. The table
11
The recommendation to manage switching at the service group level is explained in more
detail in the registration and switching strategy.
12 Source: Water for Life Market Reform Proposals. Defra December 2011
13 Separate licences will be required for new entrant retailers seeking to operate in both the
English and Scottish markets. However, Ofwat and WICS have stated an intent to co-ordinate
their respective application processes.
14 Slight variations to these authorisations exist in relation to Wales. Refer to the Water Bill for
more details.
26
below sets out activities for water and sewerage, and the parties that will be
responsible for performing them in the new retail market. (Note: activities for developer
services and trade effluent are set out in later chapters.)
The information in the table is consistent with Ofwats direction on separation of
activities for price control purposes set out in their final methodology statement15
published in summer 2013, and subsequent amendments and clarifications, which
were not outlined explicitly in Ofwats consultation.
Commodity
provision
Wholesale activities
Retail activities
Water abstraction
Water storage
Water treatment
Sewage treatment and disposal
Network
provision
Network ownership
Network maintenance
Customer-side leak and blockage

repairs
System operation
Scientific services
Metering
Determining meter functionality

and capability (joint with retailer)

Meter installation, maintenance

and repair
Meter reading
Meter ownership
Disconnections Disconnection and reconnection
and
site activity
reconnections
15
Disconnection and reconnection

decision making
Source: http://www.ofwat.gov.uk/pricereview/pr14/pap_pos201307finalapproach.pdf
27
Customer
service
Wholesale activities
Retail activities
Sales, marketing and customer

setup
Billing, payment handling and
debt management
Customer contact (explicitly
including all calls whether
network or non-network related,
and liaison back to the
Wholesaler)
Customer account management
Vulnerable customer scheme
administration
Demand side water efficiency
services
4.3.3 Required market facilitation activities and roles

To enable the new retail market to function effectively, new market facilitation activities
are required to enable:
registration and switching maintaining a record of service points and the registered
parties for providing different services to each service point, and enabling the
registered parties to be switched;
financial settlement determining and processing the financial payments between
companies to pay for services provided;
market governance assuring that market codes are appropriately administered
and that all market participants adhere to market codes;
customer awareness ensuring customers are aware of their options to change
retailer; and
industry data exchange passing relevant data between market participants to
enable market processes to be executed.
Delivering these activities will impose new requirements on the regulator, and on all
market participants. In addition, we recommend that a new MO is created with the
objective of providing services that help enable and facilitate the effective operation of
the competitive market arrangements.
Below, we set out, for each of these activities, the main services that we recommend
the MO provide. We provide more detail, including information supporting these
decisions, in section 8.9.
28
Registration and Administering a central register of service points

switching
Handling registration and market data enquiries from market
participants
Allocation of retailer less service points to retailers (if Ofwat policy
is to assign service points)
Financial
settlement
Determination of usage for standing charge-based services

Determination of any yearly volume estimate, consumption
estimate, and consumption profiling
Determination of financial charges due between market
participants
Market
governance16
Administering code modification proposals

Drafting, version control and publication of market codes
Carrying out monitoring and reporting of market compliance and
low-level routine enforcement of compliance to market rules
Arbitrating and resolving disputes between market participants
Customer
awareness
Industry data
exchange
Transmitting, validating and storing electronic messages between

a market participant and the MO, and between market participants
Key to the success of the market will be the provision of a level playing field for all
market participants, ensuring transparency of market operations, and enabling this
consistency in how market participants interact with each other. Ofwat will be carrying
out work on ensuring a level playing field; to help Ofwat, we have considered this
objective with relation to use of MO services, and formed the recommendations
outlined below.
To achieve a level playing field, we recommend to Ofwat that for standard services,
agreements and interactions, market participants should be required to make use of
the MOs services described above for example, passing messages to each other
through the MO and the MO determining the financial payments due between parties.
We recommend that this requirement should apply to all market participants of all
scales, including:
small retailers and wholesalers;
incumbent water companies and new entrants; and
self-supply licensees.
As Open Water develops, the detailed design of the MO we will seek to ensure that
market participants can interact in a manner proportionate to their circumstance and
scale.
16
Ofwat will be carrying out work on market governance which will consider this area further; to
help Ofwat, we have also considered this area, and formed the recommendations shown.
29
We recommend that a requirement to make use of MO services should apply where

the two market participants interacting are related that is, where any two market
participants interacting or transacting are the same company, are part of the same
group, or share the same parent company, for example:
the incumbent wholesaler and incumbent retailer within a region; or
an incumbent retailer and a new entrant retailer that are part of the same group or
share the same parent organisation.
However, we recognise that in some circumstances this recommendation may impose
a cost burden on water companies for example, if an incumbent water company has
integrated metering IT systems it may be prohibitively expensive to replace these with
retailer-specific systems and wholesaler-specific systems.
We also recognise that there will be circumstances where services, interactions and
agreements between market participants are non-standard for example, financially
settling a complex site-specific demand-side management agreement. In such cases,
we recommend that these should be managed bilaterally by market participants, and
not making use of MO services. During detail design, Open Water will seek to define
specific non-standard services and interactions, which we recommend to be managed
bilaterally.
We recommend that Ofwat put in place a process to allow market participants to
request dispensation from any requirement to interact through the MO in circumstances
where the parties interacting are related, and/or where services, interactions and
agreements are considered to be non-standard.
4.3.4 Upstream market arrangements

Sometime after 2019, a new upstream market for water and sewerage will be
introduced in England. High-level design for the market has not been carried out yet,
but at the simplest level this can be considered as enabling new entrants to provide
commodity services the abstraction and treatment of water, and the treatment and
disposal of sewage making use of the wholesalers networks.
Water
Supply Chain
Abstraction
Sewerage
Supply Chain
Disposal
Water and
Sewerage
Companies
- Phase 1
Water and
Sewerage
Companies
- Phase 2
Storage &
Treatment
Treatment (Sewage
& Sludge)
Distribution
Collection &
Transportation
Retail
Retail
Business
Customers
Retailers
Wholesalers
Business
Customers
Retailers
Wholesalers
Commodity Providers
Business
Customers
Figure 5: Water and sewerage supply chains and non-household market arrangements in England
following upstream competition
While the high-level design is yet to be complete, the intent of Government policy is
that the market would operate on a bilateral basis, meaning that retailers would
contract directly with commodity providers or wholesalers for commodity services, and
wholesalers for network services.
30
The table below provides an indication of where responsibility may lie for these
following the introduction of upstream competition for those items previously defined as
being wholesale activities.
Commodity
provision
Commodity provision activities

(from commodity providers or
wholesalers)
Network operation activities

(from wholesalers)
Water abstraction
Water storage
Water treatment
Sewage treatment and disposal
Network
provision
Network ownership
Network maintenance
System operation
Scientific services
Metering

Meter installation, maintenance
and repair
Meter ownership
Disconnections
and
reconnections
Disconnection and reconnection

site activity
Some of the present market arrangements, notably the WSL combined supply licence
arrangements, are in essence providing upstream competition today, and will continue
to be permitted post-April 2017. This introduces a challenge regarding how these
arrangements are managed before the full introduction of upstream competition.
Our intended approach for addressing this challenge is as follows.
In April 2017, deliver a retail market defined as being where the retailer is procuring
wholesale services from one wholesaler per product and does not procure the
commodity and network operation services from separate parties.
Require that any upstream agreements that is, where the commodity and network
operation services are being provided by differing parties, existing before the full
introduction of upstream competition be managed outside of the market on a
bilateral basis.
We discuss the implications of this for the WSL framework in section 4.6 .
We do not consider upstream market design in this retail market blueprint, and all
subsequent sections relate only to the introduction of retail competition.
31
Consultation questions:
We are seeking your views on the recommendation that registration and customer
switching should be at the service type level in the registration and switching strategy.
We are seeking your views on the recommendations regarding the scope of services
provided by a new MO in the registration and switching strategy, financial settlement
strategy, the market operator target operating model, and the systems architecture and
data model.
BP 4a: Do you agree with the recommendation to Ofwat that for standard services,
agreements and interactions, all market participants should be required to make use of
the MOs services?
BP 4b: Do you agree with the recommendation to Ofwat that market participants
should be allowed to request dispensation from any requirement to interact through the
MO in circumstances where: the parties interacting are related; and/or where services,
interactions and agreements are considered to be non-standard?
4.4 Evolution of WaSC and WOC arrangements

4.4.1 Evolution for WaSC and WOC companies
There are currently ten vertically integrated, regional monopoly WaSCs and nine
vertically integrated, regional monopoly WOCs. With the introduction of retail
competition, the role of the WaSC/WOC will change and new interactions will be
introduced. We illustrate this in the diagram below.
Water
Supply Chain
Abstraction
Sewerage
Supply Chain
Disposal
WaSC/WOC
Roles
- Today
WaSC/WOC
Roles &
Interactions
- 2017
Storage &
Treatment
Treatment (Sewage
& Sludge)
Distribution
Collection &
Transportation
Retail
Retail

and
Water only Companies (WoCs)
Incumbent Wholesalers
Business
Customers
Business
Customers
Incumbent Retailers
Competitive Ret. Arm
Net Entrant Retailers
Business
Customers
Figure 6: Water and sewerage supply chains and evolution of WaSC/WOC roles in England
WaSCs and WOCs will continue to provide both retail and wholesale functions within
their areas of appointment, but a level of separation will be required between retail and
wholesale functions17. This is indicated in Figure 6 as the Incumbent Wholesaler and
Incumbent Retailer roles. The obligations set out in legislation and licences which
WaSCs and WOCs have will continue. WaSCs and WOCs will need to continue to
satisfy themselves that they are complying with their licence obligations and other
statutory obligations.
17
Ofwat is currently consulting on the level of separation required or that the water companies
have proposed.
32
While shown as separate elements, these could be the same company. WaSCs and
WOCs will be required to continue providing an incumbent retail service, and cannot
voluntarily exit from the market.
WaSCs and WOCs may also choose to set up their own competitive retail arm, seeking
to acquire customers outside of their area of appointment, and with the probable
removal of the in-area trading ban, within their area of appointment18.
As incumbent wholesalers, WaSCs and WOCs will be required to provide wholesale
services to:
their own retail businesses (incumbent and competitive);
any new entrant retailers; and
any self-supply licensees, on a non-discriminatory basis.
Ofwat is currently consulting with stakeholders to understand how the WaSCs and
WOCs plan to separate their retail and wholesale functions. We are expecting a variety
of proposals to be made, ranging from limited functional separation through to
companies creating separate retail and wholesale business units enabled by
completely separate systems, processes and staff. As such, the market design as
proposed seeks to support all such possibilities.
Central to the success of the market will be the provision of a level playing field. In
section 4.3.3 we set out a recommendation to Ofwat that market participants should be
required to make use of the MOs services. In the case of WaSCs and WOCs this
recommendation includes using the MO services in relation to supporting interactions
between the incumbent wholesaler, incumbent retailer, and/or competitive retail arm.
4.4.2 Evolution for WaSC and WOC served customers

Most non-household customers that are served by WaSCs and WOCs do not currently
have a contract, and they will be allowed to change retailer from 1st April 2017. A small
number of customers do have contracts or are served under special agreements. For
these customers, Ofwat have advised through the price control process that such
existing agreements should be split into a wholesale element and a retail element19,
thus enabling the customer to be able to change retailer from 1st April 2017.
individual premises. This is explained further in Section 4.3.1
On retail market opening, WaSC and WOC customers will continue to be served by the
incumbent WaSC/WOC retailer(s) until such time that they choose to change.
18
The Enterprise and Regulatory Reform Act 2013 repealed the legislation relating to the inarea trading ban. Ofwats level playing field discussion document
(http://www.ofwat.gov.uk/competition/review/pap_tec201309levelplayingfield.pdf) proposes to
remove the in-area ban condition in the licence of each retailer related to an incumbent by April
2015.
Preparing business plans for the 2014 price review retail questions and answers
http://www.ofwat.gov.uk/pricereview/pr14/pr14publications/prs_web20131114businessplanqa.p
df
19
33
4.5 Evolution of NAV arrangements

4.5.1 Evolution for NAV companies
There are currently five NAVs operating in England. Their arrangements will evolve in
exactly the same manner as for a WaSC or WOC, as described in detail in section 4.4 .
In summary, the changes for NAVs are that:
they will continue to provide wholesale and retail services within their area of
appointments;
the obligations set out in legislation and licences which NAVs have will continue,
and they will need to continue to satisfy themselves that they are complying with
them;
they will be required to provide wholesale services on a non-discriminatory basis to
the customers chosen retailer; and
we recommend that NAVs should be required to interact with other market
participants and between their own retail and wholesale functions through the MO.
We recommend that Ofwat put in place a process to assess requests for
dispensation from the requirement for communications between related market
participants to go through the MO.
4.5.2 Evolution for NAV served customers

Most non-household customers who are served by NAVs do not currently have a
contract, and they will be allowed to change retailer from 1st April 2017. A small number
of customers do have contracts or are served under special agreements. For these
customers, we recommend that such existing agreements are split into a wholesale
element and a retail element, to enable the customer to be able to change retailer from
1st April 2017.
Our recommendations regarding their choices and constraints as to what services they
can switch are exactly the same as for a customer of a WaSC or WOC, and are
described in detail in section 4.4 .
On retail market opening, NAV customers will continue to be served by the incumbent
NAV retailer until such time that they choose to change.
4.6 Evolution of WSL arrangements

4.6.1 Evolution for WSL companies
The WSL arrangements currently comprise a retail only framework and a combined
supply framework, which in itself contains two different upstream arrangements. With
the introduction of retail competition, the role and interactions of the WSL will change
and new interactions will be introduced, as shown and described below.
34
Water
Supply Chain
Abstraction
Sewerage
Supply Chain
Disposal
Storage &
Treatment
Treatment (Sewage
& Sludge)
WSL Roles &

Interactions
- Today
(Water Only)
Undertaker
WSL Roles &

Interactions
- 2017
Incumbent Wholesaler
Distribution
Collection &
Transportation
Retail
Retail
WSL Retail Only

Licensee
Business
Customers
Business
Customers
New Entrant Retailer

Business
Customers
Figure 7: Water and sewerage supply chains and evolution of WSL retail only roles in England
The WSL retail only arrangements will evolve directly into the new retail market
arrangements. WSL retailers and will become what we refer to as new entrant retailers
elsewhere in this document. In 2014 we expect Defra and Ofwat to provide guidance
as to whether existing WSL retailers will have to apply for new water licences. With the
appropriate authorisations they will also be able to retail sewerage services.
We recommend that for standard agreements and interactions, market participants
should be required to make use of the MOs services described in section 4.3.3 for
example, passing messages to each other through the MO and the MO determining the
financial payments due between parties.
As the WSL framework is already in operation there will likely be existing contracts with
customers that extend beyond the opening of the new retail market, and supporting
these, legacy agreements between retailers and wholesalers. We recommend that if
the MO can perform its functions for these legacy agreements, such as determining the
financial payments due between parties, without incurring incremental development
costs, then it should be a requirement that these MO services are used. If the MO
cannot do so, then we recommend that these agreements should be considered as
non-standard and should be managed bilaterally by market participants.
Water
Supply Chain
Abstraction
Sewerage
Supply Chain
Disposal
WSL Roles &

Interactions
- Today
(Water Only)
WSL Roles &

Interactions
- 2017
Storage &
Treatment
Treatment (Sewage
& Sludge)
Distribution
Collection &
Transportation
Retail
Retail
Undertaker
Primary Undertaker
Undertaker
Primary Undertaker
Business
Customers
Business
Customers
Business
Customers
Outside of retail market design
Figure 8: Water and sewerage supply chains and evolution of WSL Combined Supply roles in England
The WSL combined supply licence arrangements will be unbundled into two elements,
a retail element and an upstream element, and there will be no additional constraints
placed on entering into new combined supply agreements/upstream agreements in the
lead up to or after retail market opening.
35
The retail element will be managed in the same way as the retail only arrangements
(see above in this section).
The upstream element introduces a challenge regarding how these arrangements are
managed before the full introduction of upstream competition. Our approach for
addressing this challenge is as follows.
In April 2017, deliver a retail market defined as being where the retailer is procuring
wholesale services from one wholesaler per product and does not procure the
commodity and network services from separate parties.
Require that any upstream agreements that is, where the commodity and network
services are being provided by differing parties, existing before the full introduction
of upstream competition be managed outside of the market on a bilateral basis.
As such, managing the upstream element of existing and new WSL combined supply
agreements will be outside the scope of the retail market. Practically, we recommend
that what this means is that while the service points served under such an agreement
will need to be registered with the market, the financial settlement and managing of
operational services should have to be administered bilaterally between the relevant
market participants.
BP 4c: Do you agree with the recommendation that service points served under a WSL
combined supply agreements should be registered with the market, but that the
financial settlement and managing of operational services should have to be
administered bilaterally between the relevant market participants, until the introduction
of full upstream competition in 2019 or later?
4.6.2 Evolution for WSL served customers

There will be no additional constraints placed on customers entering into WSL
agreements before retail market opening in April 2017, and WSL agreements entered
into prior to this will be valid until the end of the contract, even if that extends beyond
April 2017.
Non-household customers that are served by WSLs by definition can change retailer
now, and will continue to be allowed to change retailer after 1st April 2017, subject to
any exit penalties in their existing contract. We recommend that their choices and
constraints as to what services they can switch after 1st April 2017 are exactly the same
as for a customer of a WaSC or WOC, as described in detail in section 4.4 .
4.7 Evolution of private supply, on-site disposal, and

self-supply arrangements
4.7.1 Private water supplies
A number of customers have private water supplies such as on-site bore holes. Local
authorities regulate these arrangements and customers can choose which companies
they engage with to provide such services.
There will be no change to these arrangements with the introduction of the new retail
market, and private water supplies will be outside of the scope of the retail market.
36
4.7.2 On-site sewerage disposal

A number of customers have on-site sewerage storage and treatment such as septic
tanks. The Environment Agency regulates these arrangements and customers can
choose which companies they engage with to provide such services.
There will be no change to these arrangements with the introduction of the new retail
market, and on-site sewerage storage and treatment will be outside of the scope of the
retail market.
4.7.3 Introduction of self-supply arrangements

From April 2017, customers may if they wish choose to self-supply. So, instead of
purchasing water and sewerage from a retailer they will be able to purchase directly
from the wholesaler. In essence, they become a retailer, but one which can only supply
their own site(s) or those of their associate(s).
If a customer chooses to become a self-supply licensee, they will be subject to many of
the same regulations and requirements as a retailer, but we will seek to ensure that
these requirements are proportionate.
We recommend that for standard agreements and interactions self-supply customers
should be required to make use of the MOs services as described in section 4.3.3
for example, passing messages to each other through the MO and the MO determining
the financial payments due between parties. As we develop the detailed design of the
MO we will seek to ensure that self-supply customers can interact in a manner
proportionate to their circumstance and scale.
37

trade effluent
Consents and permits: The wholesaler should grant consents, and they should
continue to relate to the premises and occupier, and not the retailer. The customer
should be required to apply for the consent through their chosen retailer of trade
effluent services. Incumbent retailers will be obliged to offer a consent application
handling service, and new entrant retailers should be permitted to choose whether they
offer this service.
during the application process, except on matters related to compliance and
enforcement.
The Environment Agency (EA) will continue to grant permits for discharge into the
watercourse, and the customer will be required to interact directly with the EA.
Charging: The wholesaler should charge the retailer, and the retailer should charge
the customer, adding in a retail margin. The standard billing frequency and payments
terms should be as for other sewerage services.
Compliance and enforcement: The undertaker will continue to have an obligation to
take and analyse samples of waste discharged from premises to ensure compliance
with consents, and we recommend that this is a wholesaler responsibility.
billing, we recommend that this should be the responsibility of the retailer. However,
they should have choice over who they contract with to do this work, but the wholesaler
should be required to offer their trade effluent sampling and analysing services on a
reasonable and non-discriminatory basis.
Existing agreements: Customers with existing trade effluent agreements will be
allowed to change retailer from 1st April 2017. On retail market opening these
customers should continue to be served by the incumbent WaSC retailer until such
time that they choose to change. Existing trade effluent charging agreements should be
split into a wholesale element and a retail element (margin).

Wales
The current market arrangements for trade effluent in England and Wales can be
considered against four main activities:
38
consenting;
treatment;
charging; and
compliance and enforcement.
A consent and/or permit are required to discharge trade effluent. WaSCs are
responsible for administering and granting of consents while the Environment Agency
is responsible for administering and granting of permits. All trade effluent consents
granted by a WaSC are available on a public register.
The customer producing trade effluent has different options for treating it, which require
different consents and permits. It can be:
discharged into the foul sewer, requiring a consent from the WaSC;
treated on-site to reduce its strength, typically by a contractor appointed by the
customer, and then:
o discharged into the foul sewer, requiring a consent from the WaSC;
o discharged into the surface water or ground water, requiring a permit from
the Environment Agency; or
o pumped or tankered to a sewerage treatment works, not requiring a consent
as this is not considered to be trade effluent; or
tankered and then treated off-site by a contractor appointed and paid by the
customer. The contractor is then responsible for the trade effluent and can dispose
of it using either of the two options above. In such cases, the trade effluent
contractor is considered the customer of the WaSC and is responsible for applying
for any consent and/or permits.
The WaSC charges the customer for trade effluent based on the volume and strength
of waste discharged, and whether it is discharged into the sewer or directly into the
treatment works. This is typically done using a standard formula, the Mogden formula,
with regional variations between WaSCs.
To ensure compliance with the consent, WaSCs take and analyse samples of waste
discharged from premises. They have a variety of enforcement options available to
them for non-compliance. Additional samples may be taken for the purposes of charge
calculation and billing.
As with all sewerage services, customers cannot change their retailer for trade effluent
services, although if the customer makes use of a trade effluent contractor, then a
choice of providers exists.

The market arrangements for trade effluent in Scotland can be considered against the
same four key activities as in England and Wales. However, because of the presence
of non-household retail competition, how these activities are performed differs to
England and Wales.
The wholesaler, Scottish Water, grants the consents, but the customer is required to
apply for the consent through their current sewerage services retailer. The wholesaler
will not communicate with the customer directly, except on matters related to
compliance and enforcement. In such circumstances, the retailer is invited to any
meetings between the customer and the wholesaler and copied into correspondence.
All trade effluent consents granted by Scottish Water are available on a public register.
The options for treating trade effluent are almost identical to those in England and
Wales, although the parties the customer has to interact with are different. Therefore, it
can be:
discharged into the foul sewer, requiring a consent from Scottish Water;
treated on-site to reduce its strength, typically by a contractor appointed by the
customer, and then:
39
o
o
discharged into the foul sewer, requiring a consent from Scottish Water;
discharged into the surface water or ground water, requiring a permit
from the Scottish Environmental Protection Authority (SEPA); or
o pumped or tankered to a sewage treatment works, not requiring a
consent as this is not considered to be trade effluent; or
tankered and then treated off-site by a contractor appointed and paid by the
customer. The contractor is then responsible for the trade effluent and can dispose
of it using either of the two options above. In such cases, the trade effluent
contractor is considered the customer of Scottish Water and is responsible for
applying for any consent and/or permits.
As is the case in England and Wales, charging is based on the split Mogden formula.
However, it is the sewerage retailer that carries out the charging. The CMA determines
the charge and informs the wholesaler, who then charges the retailer. The retailer then
charges the customer, adding in a retail margin on top of the wholesale charge. Billing
frequency and payment terms for trade effluent are the same as those for other
sewerage services.
To ensure compliance with the consent, the wholesaler takes and analyses samples of
waste discharged from premises. The results of samples are sent to the retailer and
customer, through a portal and via letter. Scottish Water is not required to notify the
retailer or customer prior to carrying out a sampling visit. The responsibilities with
regard to ensuring compliance are often described as the wholesaler acting as the
policeman and the retailer acting as the customers advisor.
Customers can change their retailer for sewerage services, which encompasses the
provision of trade effluent services. A customer cannot have separate retailers for trade
effluent and other sewerage services (foul water and surface water drainage) for the
same premises.
5.3 Future market arrangements in England for new

consents and agreements
5.3.1 Trade effluent market arrangements
Our recommended market arrangements for trade effluent in England are similar to
those implemented in Scotland, with a few nuanced differences to reflect some unique
characteristics of the English market.
We recommend that the wholesaler grant consents that will continue to relate to the
premises and occupier, and not the retailer. The customer should be required to apply
for the consent through their present or chosen trade effluent services retailer (or
through their sewerage services retailer if their trade effluent is not discharged into a
separate service point). Incumbent retailers will be obliged to offer a consent
application handling service20, and new entrant retailers should be permitted to choose
whether they offer this service.
during the application process, except on compliance and enforcement matters. The
20
Undertakers currently have an obligation to manage how trade effluent consents are granted.
This obligation will continue, and we recommend that the obligation to administer applications
sits with the undertakers retail business, and that the obligation to assess applications and
grant trade effluent consents sits with the undertakers wholesale business.
40
requirement for wholesalers to make granted consents available on a public register

should remain. At this time, we are unclear as to whether any standardisation of
registers or sharing of access to registers through market data flows and processes is
required to enable effective switching, and we will consider this in future phases of
work.
The EA will continue to grant permits for discharge into the watercourse, and the
customer should be required to interact directly with the EA.
Ofwats price control work will define how charges are determined, including the level
of regional variation. In section 5.3.2 we discuss the potential role of the MO in
determining the charges due.
We recommend that roles and responsibilities for trade effluent charging should be the
same as the Scottish market, with the wholesaler charging the retailer, and the retailer
then charging the customer, adding in a retail margin on top of the wholesale charge.
The standard billing frequency and payments terms should be the same as for other
sewerage services, and are explained further in section 8.3 . Our recommended
approach for circumstances where measurements are required from customer-owned
meters or sub-meters for the purposes of determining trade effluent charges, will be
defined as part of Open Waters metering strategy work scheduled for early 2014.
As is the case in Scotland, to ensure compliance with the consent the undertaker will
continue to have an obligation to take and analyse samples of waste discharged from
premises, and we recommend that the wholesaler is responsible for this. The detail of
the interactions between the wholesaler, retailer and customer, such as whether the
retailer is advised of compliance visits before they occur, will be developed as part of
detailed market design work.
billing, we recommend that these should be the retailers responsibility. They should be
able to choose who they contract with to do this work, but we recommend that the
wholesaler should be required to offer their trade effluent sampling and analysing
services on a reasonable and non-discriminatory basis.
Customers will be able to change their retailer for trade effluent services, and we
recommend that they can do this independently of their retailer for other sewerage
services. This is explained further in Section 4.3.1
5.3.2 Role of the market operator in trade effluent

In section 4.3.3 we outlined the services we recommend to be provided by a new MO
in relation to water and sewerage. Our default design recommendation is that the
services that the MO provides should be used for all contestable products and services
in the non-household market. However, for trade effluent we think that, because of the
bespoke and site-specific nature of the agreements, it may be appropriate for:
some or all communications to be considered as non-standard and accordingly
communicated directly between retailers and wholesalers and not through the MO;
and
the calculation of charges due to be considered as non-standard and accordingly
determined by the wholesaler and not by the MO.
We will carry out more work on this in early 2014 and share our conclusions in due
course.
41
BP 5a: Do you agree with the recommendation that customers should be required to
apply for trade effluent consents through their chosen retailer of trade effluent
services?
BP 5b: Do you agree with the recommendation that new entrant retailers should be
permitted to choose whether they offer a trade effluent consent handling service?
BP 5c: Do you agree with the recommendation that wholesalers should not be
permitted to communicate with the customer directly during the consent application
process, except on matters related to compliance and enforcement?
BP 5d: Do you agree with the recommendation that the customer should be required to
interact directly with the Environment Agency to obtain a discharge permit?
BP 5e: Do you agree with the recommendation that trade effluent billing frequency and
payment terms should be the same as for other sewerage services?
BP 5f: Do you agree with the recommendation that if the retailer requires additional
sampling and analysis for the purposes of customer billing (beyond that required for
compliance and enforcement) this should be the responsibility of the retailer?
BP 5g: Do you agree with the recommendation that wholesalers should be required to
offer their trade effluent sampling and analytical services to retailers on a reasonable
and non-discriminatory basis?
5.4 Future market arrangements in England for existing

consents and agreements
Customers existing consents will continue and any expiry date they may have will not
change as a result of the introduction of retail competition.
Non-household customers with existing trade effluent agreements will be allowed to
change retailer from 1st April 2017. On retail market opening these customers should
continue to be served by the incumbent WaSC retailer until such time that they choose
to change. We recommend that existing trade effluent charging agreements should be
split into a wholesale element and a retail element (margin). The customers chosen
new trade effluent retailer should pay the wholesaler on the basis of the wholesale
element.
BP 5h: Do you agree with the recommendation that existing trade effluent charging
agreements should be split into a wholesale element and a retail element (margin)?
42

developer services
Key recommendations made in this chapter:
Roles in the developer services market: We recommend that developers interact
with retailers of developer services, and that the following organisations should be
able to enter this market: incumbent non-household retailers of water and/or sewerage
(with an obligation to provide such services); new entrant water and/or sewerage
retailers. and new entrant specialised developer service only retailers such as SLOs or
developers themselves.
We recommend that Ofwat consider how to enable SLOs and developers to act as a
retailer of developer services without them being a water and/or sewerage services
retailer, with suitable controls and governance (such as accreditation), but without
undue burden or complexity (such as licensing).
We recommend that retailing of developer services to a developer should be a
separable service to that of retailing water and sewerage services.
Administration and customer service activities: The retailer of developer services
should be responsible for administration and customer service related to developer
services, irrespective of whether the development is household, non-household or
mixed.
The retailer of developer services, and not the wholesaler, should be responsible for
registering new premises, service points, and services.
Planning, design, and engineering works: Responsibilities and options to use SLOs
and contractors will remain unchanged. Interactions between the developer and
wholesaler should be through the retailer of developer services.
Payment handling: All payments, irrespective of whether they are from the developer
or to the developer, should be managed through the retailer of developer services.
If the option for payments related to developer services take the form of repayment
over a period of up to 12 years remains, the developer should not be permitted to
change the retailer of developer services with which they interact for a particular
agreement during the repayment period.
Completed and in-progress developments: For developments that are part-way
through to completion, and for charging arrangements and financial payments being
made which relate to developments completed before 1st April 2017 but where the
payment schedule extends beyond 1st April 2017, the relationship should transfer on
1st April 2017 to the incumbent non-household retailer.
The developer should not be permitted to switch to another retailer of developer
services for payment arrangements related to completed developments.
43
Throughout this document, developer services refers to services to provide the

infrastructure needed to connect new premises to a water supply and/or sewerage
services, and/or to make new service points and/or services available at existing
premises. This encompasses developments of all sizes for example, from connecting
a single house through to building a number of premises and associated infrastructure
as part of a regeneration scheme. It includes developer service activities from preplanning through to when customers are able to start using water and sewerage
services.
While the scope of Open Water and this market blueprint is clearly defined as being for
non-household customers only, it is impossible to develop effective developer service
proposals without considering the household market, especially because of the
complexities associated with mixed-use developments. As such, and for completeness,
we present the present and recommended future market arrangements for household,
non-household and mixed-use developments.

Wales
For the purposes of this market blueprint, we define and refer to the following
developer services activities.
Type of activity
Activity
Providing developer information
Administration and customer

service
Administering applications
Registering new service points
Pre-planning
Planning and design

Engineering design
Engineering project management
Installing on-site mains and sewers
Installing off-site mains and sewers
Engineering works
Connecting new mains and sewers to live mains

and sewers
Connecting premises to live mains and sewers
Reinforcing upstream infrastructure
Inspection and adoption
Payment handling
Making payments for engineering works
In the current English and Welsh markets, responsibilities and processes for developer
services are the same for household, non-household, and mixed-use developments.
6.1.1 Administration and customer service

All administration and customer service is carried out by the developer with the
incumbent (i.e. the WaSC, WOC and/or NAV).
44
6.1.2 Planning and design

Carrying out pre-planning work, such as assessing if there are any capacity constraints
on a proposed new development, is non-contestable and the responsibility of the
incumbent.
Carrying out engineering design work is contestable. Incumbent companies are obliged
to offer to undertake these works using current legal and regulatory procedures, and
developers may choose whether to use either of the following.
For water: the incumbent water company or a Self Lay Operator (SLO). SLOs are
unregulated, but must be accredited to perform these works.
For sewerage: the WaSC, NAV or a contractor of their choice.
If the developer uses an SLO or contractor to perform engineering design, the
incumbent water company is responsible for reviewing and signing off this work.
6.1.3 Engineering works

Responsibility and options for performing of engineering works are as follows.
For water: all activities except connecting new mains to live mains are contestable.
For contestable activities, developers may choose whether to use the incumbent or
an SLO.
For sewerage: all activities are contestable and developers may choose whether to
use the WaSC, NAV or a contractor of their choice.
Incumbent companies are obliged to offer to carry out these works using current legal
and regulatory procedures.
Once engineering works have been completed, the incumbent company is responsible
for inspecting the works before adopting them. Regardless of who carries out the
engineering works, the incumbent water companies adopt the new infrastructure and
have enduring ownership of the new assets, and incumbent sewerage companies
adopt most but not all of the new infrastructure.

If the incumbent company carries out the works, then the developer may be required to
make payment to them. Similarly, if the developer/SLO carries out the works, then the
incumbent company may need to make payment to them. The amount due is based on
the cost of works with adjustment for expected future income from the newly-connected
premises. Payments from the developer to the incumbent company may take the form
of a one-time payment, or repayment over a period of up to 12 years, and payments
from the incumbent to the developer/SLO are one-time based only.

Developer services in Scotland encompass the same activities as for the English and
Welsh markets. However, there are a number of important differences regarding
market responsibilities and processes. We describe these below.

For household developments, Scottish Water is responsible for administration and
customer service.
45
For non-household developments, the retailer is responsible for administration and

customer service. Retailers are not obliged to offer this service. Scottish Water charges
retailers an administration fee for handling an application and retailers pass this charge,
plus a retail margin, onto developers.
For mixed-use developments, a single application for technical approval is submitted,
with the appropriate process (household or non-household) determined on a sitespecific basis depending on predominant property type planned for the completed site.
Applications for individual connections on the site will then be submitted through the
household or non-household process depending on the property type.
For all types of development, the developer must interact directly with Scottish Water in
relation to any upstream reinforcement which may be required.
Scottish Water is responsible for registering the new service points in the market when
connection to the mains network is complete. The service point is then assigned to the
retailer handling the application to bring the customer into charge.

Undertaking pre-planning work is non-contestable and the responsibility of Scottish
Water.
The developer is responsible for engineering design. They may carry out work
themselves, or may appoint a utility connection provider (UCP)21 or other appropriate
party.

The developer is responsible for engineering works. They may carry out this work
themselves, or appoint a UCP or other appropriate party.
Physical connections of either new mains and sewers or new premises to the existing
water and sewerage networks are contestable. The developer can make use of either
Scottish Water or a UCP to carry out this work.
All new mains and sewers (on- or off-site), which are to be adopted by Scottish Water,
must be laid by a UCP acting on behalf of the developer. Scottish Water has
responsibilities in relation to inspection of infrastructure prior to adoption.

Once they have been built, Scottish Water typically adopts those new assets that are
sited on a public road or footpath.
For non-household developments, Scottish Water charges the retailer, which then in
turn charges the developer cost plus a retail margin. Payments for household
developments are made directly from the developer to Scottish Water. Payments for all
developments are only ever one-time based.
21
UCPs are accredited by the Water Industry Regulations Scheme (WIRS).
46
Type of
activity
Activity
Household development
Providing developer
information
Administration
and customer
service
Planning and
design
Engineering
works
22
Developer direct to
Scottish Water
Administering
applications
Registering new
service points
Pre-planning
Engineering design
Engineering project
management
Installing on-site
mains and sewers
Installing off-site
mains and sewers
Connecting new
mains and sewers to
live mains and sewers
Mixed-use development
For connection of new mains serving both household and
non-household premises to live mains: application of
technical approval for entire site either through the nonhousehold retailer or directly to Scottish Water, decided on
a site-by-site basis depending on predominant property
type.
For connection of non-household premises and new mains
only serving non-household premises to live mains:
through non-household retailer.
For connection of household premises and new mains
only serving household premises to live mains: developer
direct to Scottish Water.
For upstream works: developer direct to Scottish Water.
Through non-household
retailer22
Scottish Water
Scottish Water
Responsibility of developer through use of a UCP or other appropriate party
Responsibility of developer through use of a UCP or other appropriate party
Responsibility of developer through use of a UCP
Responsibility of developer through use of a UCP
Carried out by Scottish Water at regulated price or by any UCP acting on behalf of the developer
Retailer not obliged to offer this service. The wholesaler charges the retailer an administration fee, who passes this onto customers.
47
Non-household
developments
Type of
activity
Activity
Connecting premises
to live mains and
sewers
Reinforcing upstream
infrastructure
Inspection and
adoption
Payment
handling
48
Making payments for

engineering works
Household development
Mixed-use development
Non-household
developments
Inspection carried out by Scottish Water (not all infrastructure adopted)
Scottish Water charges

developer directly
For applications through non-household retailer: Scottish

Water charges retailer, retailer charges cost plus margin to
developer.
For all other works: Scottish Water charges developer
directly.
Scottish Water charges

retailer, retailer charges
cost plus margin to
developer
6.3 Future market arrangements in England for new

developments
6.3.1 Key roles in the market
Ofwat has previously communicated23 that the market arrangements for non-household
developer services in England will be similar to those implemented in Scotland,
whereby the retailer will be responsible for administration and customer service, and
the wholesaler will be responsible for performing engineering works. Ofwat has
subsequently clarified that developer services, in terms of managing developer queries
and providing information to developers, should all be allocated to non-household
[retailers], irrespective of whether the development is household, non-household or
mixed24.
Currently, developers in England are able to use SLOs and contractors to carry out
some engineering works and to interface between themselves and the wholesalers.
Ofwat has indicated to us that to simplify the developer experience parties such as
SLOs should be able to provide the same services as retailers during the development
of a site. We recommend that such an approach is adopted.
We have taken these as inputs to the recommendations outlined below.
Developer
Service
Activities
Engineering design
& engineering
works
Administration and
customer service
Developers
Wholesalers
Participants
And
Choices
Retailers
Of Developer Services
Self Lay Operators &
Contractors
Developers
Figure 9: Proposed key roles for developer services
We recommend that developers interact with retailers of developer services, and that
the following organisations should be able to enter this market.
Incumbent non-household water and/or sewerage retailers, which we recommend
should have an obligation to provide such services.
New entrant water and/or sewerage retailers, which we recommend should not have
an obligation to provide such services, in order to enable retail specialisation.
New entrant specialised developer service only retailers such as SLOs or
developers themselves. We recommend that Ofwat consider how to enable SLOs
and developers to act as a retailer of developer services without them being a water
and/or sewerage services retailer, with suitable controls and governance (such as
accreditation), but without undue burden or complexity (such as licensing).
Setting price controls for 2015-20 final methodology and expectations for companies
business plans.
24 Preparing business plans for the 2014 price review retail questions and answers
http://www.ofwat.gov.uk/pricereview/pr14/pr14publications/prs_web20131114businessplanqa.p
df
23
49
To enable new entrant retailers to specialise, we recommend that new entrant retailers
of services should be permitted to choose to serve segments of the market of their
choice. For example, they could choose to serve just household developments, or just
developments of a certain scale.
We recommend that providing developer services to a developer should be a
separable service to providing water and sewerage services, since developer services
is effectively a pre-supply service. Therefore, having a developer services arrangement
through one retailer of developer services should not preclude the developer or
subsequent occupier of new non-household premises from choosing an alternative
retailer for water and sewerage services, once the new service point has been
registered.

As described above, administration and customer service related to developer services
should be the responsibility of the retailer of developer services, irrespective of whether
the development is household, non-household or mixed. Developers will be able to
choose which retailer of developer services they use.
The retailer of developer services should act as the link between the developer and the
party (or parties) carrying out the engineering works, including wholesaler(s), SLO(s)
and contractor(s). Where wholesalers are permitted to charge for their own
administration efforts, we recommend that wholesalers should charge retailers and that
retailers pass this charge plus a retail margin onto developers.
Ofwats PR14 guidance on retail activities for developer services concluded that
retailers should be responsible for providing developer information and administer
applications. We recommend that in addition to these activities, the retailer of
developer services should be responsible for registering new service points, and
informing any relevant parties of new connections, including the:
wholesaler;
MO; and/or
household retailer.
While this recommendation is inconsistent with Scotland, we think that such an
approach is consistent with the retailer providing all administration services, and
resolves issues that would arise if the wholesaler were responsible, but not for any or
parts of the engineering works.

For carrying out planning and design, it is beyond the scope of the Open Water
programme to amend the choices a developer has regarding whether to use the
wholesaler or an SLO or contractor, as described in section 6.1 .
We recommend that the party (or parties) chosen to carry out this work should interact
with the developer through the developers chosen retailer of developer services, which
in turn will interact with the wholesaler where needed.
We recommend to Ofwat that wholesalers are obliged to offer to carry out these works
using current legal and regulatory procedures.
50

For carrying out engineering works, it is beyond the scope of the Open Water
programme to amend the choices a developer has regarding whether to use the
wholesaler or an SLO or contractor, as described in section 6.1 .
We recommend that the party (or parties) chosen to carry out this work should interact
with the developer through the developers chosen non-household retailer or SLO (as
illustrated in Figure 9).
We recommend to Ofwat that wholesalers are obliged to offer to carry out these works
using current legal and regulatory procedures.

Ofwat has stated25 that they will consult on charging rules for developer services.
During our work on developer services, we have identified a number of issues resulting
from the introduction of retail competition which we would recommend Ofwat consider
in their work, including:
whether payments between developers and wholesalers can continue to be made
on a repayment basis over up to 12 years;
how, if payments for developer services are being made over up to 12 years, the
impact of customers changing retailers will be factored into charge calculations,
including for payments relating to developments that complete before market
opening in 2017;
whether, if charges for developer services are in part or whole retrospectively
determined based on actual site consumption, what risk (if any) is carried by the
non-household retailer, and hence whether the retail margin is defined as a
proportion of/on top of a wholesale charge, or as a fixed amount; and
what costs the retailer may reasonably charge for payments due from the
wholesaler to the developer.
Irrespective of the answers, we recommend that all payments from the developer to the
wholesaler should be managed through the retailer of developer services. We also
recommend that all payments from the wholesaler to the developer should also be
managed through the retailer of developer services. We recognise that this
recommendation is inconsistent with Scotland, but we think that the benefits in
consistency across the two payment flow directions in England justifies the
inconsistency with Scotland.
Developers will be able to choose which retailer of developer services they appoint
(see section 6.3.1 ). If they agree to a repayment-over-time model with that retailer of
developer services, we recommend that the developer should not be permitted to then
change the retailer of developer services that they interact with for that repayment
agreement. We consider the initial application handling and subsequent handling of
payments to be a single transaction, and allowing switching during the payment phase
may cause issues where the retailer of developer services is recovering the one-time
costs of application handling through a retail margin on the long-term payments. As we
explained in section 6.3.1 we recommend that providing developer services and
providing water and sewerage services should be separable, and hence this would not
Charging for new connections a discussion paper,

http://www.ofwat.gov.uk/competition/review/pap_tec201311newconnections.pdf
25
51
constrain a customers choice as to from where they purchase water and sewerage
services.
6.3.6 Role of the market operator in developer services

In section 4.3.3 we outlined the services we recommend to be provided by a new MO
in relation to water and sewerage. Our default design approach is that the services the
MO provides should be used for all contestable products and services in the market.
However, because of the bespoke and site-specific nature of the agreements with
developer services, it may be appropriate for:
some or all communications related to developer services to be considered as nonstandard and accordingly communicated directly between retailers of developer
services and wholesalers and not through the MO; and
the calculation of charges due to be considered as non-standard and accordingly
determined by market participants and not by the MO.
We will carry out further work on this in spring 2014 and share our recommendations in
early summer 2014.
In section 6.3.2 we recommend that the retailer of developer services should be
responsible for managing registration of new service points associated with nonhousehold premises. This would naturally require interaction with the MO in their role of
administering the central register of contestable sites in the non-household market.
BP 6a: Do you agree with the recommendation that developers interact with retailers
of developer services, and that the retailing of developer services should be a
separable service to the retailing of water and sewerage services?
BP 6b: Do you agree with the recommendation that administration and customer
service related to developer services should be the responsibility of the retailer of
developer services, irrespective of whether the development is household, nonhousehold or mixed?
BP 6c: Do you agree with the recommendation that registration of new premises,
service points and services should be the responsibility of the retailer of developer
services and not the wholesaler?
BP 6d: Do you agree with the recommendation that interactions between the developer
and wholesaler should be through the retailer of developer services?
BP 6e: Do you agree with the recommendation that all developer service payments
should be managed through the retailer of developer services?
BP 6f: Do you agree with the recommendation that the developer should not be
permitted to change the retailer of developer services they interact with for a particular
site during the payment period?
6.4 Future market arrangements in England for

completed and in-progress developments
The market arrangements outlined in section 6.3 relate to development applications
that start after the retail market opens on 1st April 2017. However, at that point there will
52
be development applications that are still in progress, and there will be financial
payments being made in relation to developments completed in the previous 12 years.
We set out our recommended approach below.
For developments that are part-way through to completion, we recommend that the
relationship should transfer on 1st April 2017 to the incumbent retailer. Unless contracts
between the developer and the incumbent company prohibit it, if the developer has not
started to pay for services provided, the developer should be able to change the retailer
of developer services with which they are interacting.
For charging arrangements and financial payments being made that relate to
developments completed before 1st April 2017 but where the payment schedule
extends beyond 1st April 2017, whether from the developer or to the developer, we
recommend that the payment handling should sit with the incumbent retailer.
Consistent with our approach for repayments outlined in section 6.3 , we recommend
that the developer should not be permitted to change the retailer of developer services
with which they interact for legacy repayment agreements.
BP 6g: Do you agree with the recommendation that the developer should not be
permitted to switch to another retailer of developer services for payment arrangements
related to completed developments?
53

subcontracted and
associated services
Market interactions with organisations: Organisations providing subcontracted and
associated services, for example meter reading and water retailer recommendations,
should by default interact with the market and the Market Operator through the party
who they are working on behalf of / who appointed them.
Market Operator constraints: The Market Operator should not be permitted to offer
subcontracted and associated services. It should be permitted to negotiate bilateral
access agreements to Market Operator systems and market data on a commercial
basis with organisations providing such services.
In 2014 we will be undertaking work to develop our strategy and market design in
relation to parties providing subcontracted and associated value-add services to market
participants. In Section 7.1 below we set out our thoughts on what these services may
be, and, recognising the importance of this work to other design activities being
undertaken now, we have produced in Section 7.2 a series of working assumptions as
to the strategy and market design in this area.
In developing our assumed market arrangements we have sought to meet the following
objectives:
Competition and choice should be maintained for existing subcontracted and
associated services; and
Competition and choice should be allowed to emerge for possible new
subcontracted and associated services.
7.1 Present and possible future subcontracted and

associated services
Retailers, wholesalers, customers and developers, in both the present and future
market structures, are likely to appoint agents or other organisations to act on their
behalf. In the table below we set our thoughts on what some of the services are.
54
Working on behalf
of / appointed by
Service provided
Meter reading
Water and sewerage

retailers
Customer service (e.g. customer contact centres, billing,

payment handling)
Information technology (e.g. application development,
application maintenance)
Shadow financial settlement26 and market data reconciliation
Meter asset provision
Meter operations (e.g. meter installation, meter maintenance)
Water and sewerage

wholesalers
Operational services (e.g. pipe laying, burst rectification)

Information technology (e.g. application development,
application maintenance)
Shadow financial settlement and market data reconciliation
Bill aggregation, checking and reformatting
Water efficiency advice and on-site water use management
On-site trade-effluent treatment
Customers
Water and sewerage provider and product advice,

recommendation and procurement negotiation (e.g.
recommendation websites, outsource procurement services)
Water and sewerage provider and product brokerage and
reselling (e.g. purchasing water and reselling under an
alternative brand)
Developers
Self-lay operational services (e.g. pipe laying, connections)
7.2 Assumed market arrangements

Considering the objectives stated at the start of this chapter, and our requirement to
maintain a deliverable scope of work, Open Water will take the following approach with
respect to subcontracted and associated services:
We will do nothing to intentionally curtail competition for existing services or prevent
competition for possible new associated services emerging; and
We will do nothing to proactively increase competition for existing services, and we
will leave the creation of possible new associated services to market forces.
Our assumed market arrangements for organisations providing subcontracted and
associated services, and specifically how the interact with the Market Operator (MO)
are therefore:
26
Shadow financial settlement is the activity often performed by a market participant of

replicating the settlement calculations performed by an MO to provide assurance to themselves
that financial charges determined by the MO are accurate.
55
Organisations providing these services should by default interact with the market
and the MO through the party who they are working on behalf of / who appointed
them27.
Organisations providing these services should not need to sign up to codes. The
party who they are working on behalf of / who appointed them may be a code
signatory, but these parties should not need to be.
Furthermore, with relation to the MO, our assumed strategy28 is that:
The MO should not be permitted to offer the services listed in Section 7.1 .
Permitting the MO to offer such services would stifle the emergence of a competitive
market in this area.
The MO should be permitted to negotiate bilateral access agreements to MO
systems and market data on a commercial basis (with suitable controls being put in
place regarding access to market data) with organisations providing such services29.
Allowing the MO to offer such services may help enable a competitive market to
emerge without materially impacting Open Waters ability to deliver for 1st April 2017.
BP 7a: Do you agree with the recommendation that organisations providing
subcontracted and associated services should by default interact with the market and
the Market Operator through the party who they are working on behalf of / who
appointed them?
BP 7b: Do you agree with the recommendation that the MO should not be permitted to
offer sub-contracted and associated services?
BP 7c: Do you agree with the recommendation that the MO should be permitted to
negotiate bilateral access agreements to MO systems and market data on a
commercial basis with organisations providing such services?
27
Future metering strategy work will consider if there is any requirement for market participants
to provide meter reading services to each other. If there is, then we will consider whether such
interactions should make use of the MO.
28 These elements have been confirmed through our work on the MO scope of services. See
section 8.9.1 for more detail.
29 Explicitly, this includes any organisations providing outsource customer services, such as
Bristol and Wessex Billing Services.
56
8. Market strategy and highlevel design

8.1 Structure of the market strategy and high-level
design
This chapter summarises the strategy and high-level design we are recommending to
implement the market arrangements. We have broken this down into 11 areas, as
indicated below in Figure 10. For each area, we summarise the recommended strategy,
while a supporting strategy and high level design paper presents the recommendations
in more detail.
Wholesale Contracts Strategy
Customer Contracts & Tariffs

Strategy
Market Governance &

Performance Management
Strategy
Market Operator
Target Operating Model
Operational Services Strategy
Systems Architecture
& Data Model
Metering Strategy
Codes Architecture
Financial Settlement Strategy
Upstream Considerations
Registration & Switching

Strategy
We are developing this work in two tranches. Those items shown in darker colours in
Figure 10 have been developed and are presented in this iteration of the market
blueprint, while those in lighter colours will be developed in spring 2014 and presented
in a second iteration of this document, which will be published in early summer 2014
(with the exception of work on codes architecture and market governance and
performance management strategy, which Ofwat will lead).
Figure 10: Structure of strategy and high level design papers

8.2.1 Customer choice when switching retailer
water, non-potable water, foul water, surface water drainage, and trade effluent. As a
result, a customer would be able choose to have different retailers for each service
type at each premises, or they may choose an offer which bundles services across
types and premises, which we expect to be offered by retailers. The key reasons for
this recommendation30 are that it should:
promote competition and potentially provide a greater choice of retail services,
innovation and specialist retailers, meeting Defras stated aim to allow new entrants
30
The recommendation to manage switching at the service group level is explained in more
detail in the registration and switching strategy.
57
to be able to offer specialised services and enable all new entrants to specialise in
the services they wish to provide 31; and
ensure the market design is adaptable to the development of the upstream market,
through retail service alignment to upstream commodities.
Where services cannot be separately delivered, measured and charged for example,
if foul water and surface water drainage are combined then the customer should be
able to choose their water retailer for all water services and sewerage retailer for all
sewerage services.
A customer must meet two requirements to be able to switch their retailer. The service
they wish to switch must be:
being supplied to a non-household premises located in the area of appointment of
an undertaker operating wholly or mainly in England; and
the customer requesting the switch should also be being directly served and billed
by the current retailer (that is, not a service point subject to a sub-metering
arrangement where the end-user is paying somebody else who in turn pays the
retailer).
8.2.2 Creating a central register

There will be a central register of service points in the market, which the MO will host
and maintain. The register should be principally developed from national datasets,
against which incumbent water companies should be required to map their existing
service point information. The Open Water programme will prototype and pilot the
development of the register with a sample of companies, so that it can be developed
and made available ahead of market opening.
Market participants should all have access to this central register. Customers should
not be able to access the register directly they should need to contact a market
participant to enquire about or take up their ability to switch and to access data about
the services their premises receive.
8.2.3 Customer awareness

We recommend that there should be a centralised marketing campaign to raise
customers awareness of switching, complemented by retailers direct marketing
activities. This campaign should not be delivered by the MO, but should be enabled by
Ofwat and involve a range of organisations, including retailers (both new entrants and
incumbents); and customer representative bodies such as the Consumer Council for
Water.
As the industrys regulator, we recommend that Ofwat should publish a public record of
currently licensed retailers, if possible linked to the existing Scotland on Tap website.
We recommend that the MO should not provide a retailer or tariff comparison service.
We hope that new providers will emerge to provide such services to customers.
8.2.4 The switching process

We recommend that there should be a standard switching process, with minor
variations to reflect the different switch and market change scenarios.
31
Source: Water for Life Market Reform Proposals. Defra December 2011
58
Where a customer moves to a new premises, they should continue to be served by the
retailer who has been serving the customers service point(s) (under a deemed
contract) until the customer requests otherwise.
By requesting a new connection through a retailer a customer should be considered to
have selected that retailer and the resulting service point should be registered to them.
Where service points are identified as being served but not currently billed, they should
be assigned to the incumbent retailer until a customer chooses otherwise.
Where service points needs to be assigned because there is not a retailer, this should
be as a last resort, allowing first for customer choice and market-based solutions.
Where it remains necessary, service points should be assigned in line with an
assignment policy agreed by Ofwat and administered by the MO, and see customers
enter deemed contracts with the new retailer until they choose otherwise.
To make a switch, a customer, or a third party broker acting on their behalf, should
make their request to the retailer to whom they wish to switch. The new retailer should
then lead the administration of the switch and resulting communications with the MO
and the customer. Brokers should not interact directly with the MO and should have to
submit the switch request through the new retailer.
There should be a limited set of scenarios where the current retailer will have a role in
communicating with the customer during the switch process in particular, to resolve
an objection or where the customer has not initiated the switch.
The switch process should incorporate a window to allow for:
a customer cooling off period;
cancellation by the new retailer; and
objection by the current retailer after the customers switch request is submitted
rather than before.
There should be a defined set of reasons under which the current retailer can object to
a customers request to switch to another retailer, and we recommend that a new
retailer should be able to refuse a customer request to switch to them such that
retailers have scope to specialise in segments of the market. However, there should be
a defined set of reasons why they cannot refuse to accept a switch request.
Retailers should have an enduring responsibility to serve a customer until they choose
to switch. Detailed design and Ofwat will consider in further detail what specific
customer protection provisions are needed in the switching process in particular,
around sales and marketing activities. We recommend that the current retailer should
be permitted to undertake sales activity following a switch request.
There should be a maximum standard timescale for switches to take effect after the
MO has been notified of the switch request. A customer should be able to select an
alternative date beyond this within a specified window. The objections process should
stop the clock on this switch timescale but should have a defined escalation and
arbitration route to ensure they are resolved in a timely manner and switches are not
being blocked for unjustified reasons.
59

8.3.1 Products and services in settlement
All products and services provided by one market participant to another will need to be
paid for. For the purposes of the financial settlement strategy, we characterise the
products and services into the following three groups.
Continuously delivered services where charging is volume based and either metered
or estimated, such as a metered water supply.
Continuously delivered services where charging is time based, such as a standing
charge for meter provision or unmeasured supplies.
Event-based services where charging is based on the number and type of events,
such as a meter exchange.
8.3.2 Timing and frequency of settlement

Ofwats information notice published in November 201332 sets out decisions that the:
settlement period for continuously delivered services will be one calendar day; and
the billing period for all services will be one calendar month.
For all types of service, we recommend that the MO should issue initial settlement
calculations for a billing period (calendar month) five business days after the end of the
billing period, for all calculated charges due between all market participants.
For continuously delivered services, whether volume based or time based, we
recommend that, following initial settlement, there should be two resettlement runs, two
and eight months after initial settlement, with full and final settlement after 13 months.
For event-based services, we recommend that there is only one settlement run, and so
the initial settlement will be the full and final settlement.
8.3.3 Payment terms and credit requirements

Ofwats information notice published in November 2013 sets out decisions that:
standard payment terms are 30 days from the last day of the billing period, or 15
days after the invoice is deemed to be received, whichever is the later; and
a retailer needs to have either a letter of credit from a guarantor with a defined
minimum credit rating, or an agreement with a wholesaler to use an escrow account.
We recommend that the credit rating requirement for standard payment terms should
be the minimum investment grade rating that is, Standard & Poors (BBB-), Fitch
(BBB-), or Moodys (Baa3).
Future work will recommend what amount of credit should be posted by a debtor.
Market participants may negotiate non-standard payment and credit terms. In order to
ensure transparency and a level playing field, we recommend that there should be a
requirement to publish details of such agreements and to make them available to all
other market participants.
32
Available at: http://www.ofwat.gov.uk/competition/review/prs_in1321pr14paymentterms.pdf
60
8.3.4 Settlement and estimation calculation approach

The charges due will be based on wholesale charges schemes.
For continuously delivered services where charging is volume based and either
metered or estimated, reflecting that (i) the market settlement period (a calendar day) is
more frequent than meter reading for most services and service points, and that (ii)
meter readings may not be available at the time of settlement, we recommend that the
following approach should be taken to determining the consumption value used in
settlement.
Daily metered service points should use actual meter reading values. When daily
metered values are unavailable, historical service point consumption data should be
used to estimate consumption.
Non-daily metered service points should use a combination of periodic meter
readings, a yearly volume estimate (YVE) and consumption profiles. Consumption
for a settlement period should be based on:
interpolation between two periodic meter readings using consumption profile factors;
or
for settlement periods after the latest periodic meter reading, a combination of the
YVE and consumption profile factor will be employed.
Future high-level design work will consider the process for calculating the YVE and the
consumption profiles.
8.3.5 Roles and responsibilities in settlement

The party providing the service should be responsible for determining how much
service has been provided, including taking meter readings, and providing this
information to the MO. With respect to meter readings, we recommend that the
wholesaler should be responsible for any verification of meter readings provided by
retailers.
For standard agreements, we recommend that the MO should:
retain meter readings for use in settlement, and perform any necessary adjustment
or aggregation of this data required to perform settlement;
determine estimated usage in the absence of actual data; and
determine charges due between market participants.
We recommend that it should be mandatory for market participants to use these MO
services for all agreements, except for non-standard agreements where the MO
systems and processes would require change to deliver the services. In such
circumstances, we recommend that the party providing the service should be
responsible for determining charges due.
The party providing the service is responsible for billing and collections.
Future high-level design work will recommend responsibilities for determining the
quantity of credit to be posted by a retailer.
8.4 Metering strategy

This work is scheduled to start in spring 2014, and will be presented in a second
iteration of this market blueprint to be issued in early summer 2014.
61

8.5.1 Services and service levels
Both wholesalers and retailers will provide operational services, and market codes will
govern the provision of these services. Wholesalers must provide operational services
impartially to the incumbent retailer and all new entrant retailers.
Open Water will work to describe operational services using common terminology
across the whole market. We recommend that all operational services provided by any
market participant in England, whether described using common terminology or not,
should be catalogued centrally.
For services that are consistently defined, it would be possible to develop standard
levels of service (for example, the number of days to complete a task), and such an
approach could provide benefits in market consistency, especially for retailers and
customers. Ofwat will carry out work to consider service levels; to help inform that work,
Open Water will carry out an information gathering exercise to establish how consistent
service levels already are. We recommend that once the market has opened, the MO
should collect and publish information on service performance to allow retailers to
compare and challenge wholesalers.
We recommend that market participants should be able to negotiate non-standard
services and/or service levels for example, a given service being completed more
quickly may be offered at a higher price. In order to ensure transparency and a level
playing field, we recommend that Ofwat should consider a requirement to publish
details of such agreements. It is likely that under current licences and competition
legislation there would be a requirement to offer such non-standard services and
service levels in a non-discriminatory manner, and publication of details could help to
facilitate this.
8.5.2 Administering service requests and notifications

The MO should be responsible for transmitting, validating and storing all standard
electronic service requests and notifications between wholesalers and retailers. It
should be mandatory to use this MO service.
The MO should provide the capability for transmitting and storing (but not validating)
non-standard service requests and notifications, and use of this service should be
optional.
We recommend that the above should still hold true where the participants are related,
unless a specific dispensation has been granted (see section 4.3.3 for more detail on
our recommendations regarding dispensations from use of MO services).
Retailers will generally be responsible for all communication with their customers
regarding operational services. Where this is not the case (for example, when a
wholesaler is on site) the wholesaler should be required to keep the retailer informed of
any works carried out.
8.6 Market governance and performance management

strategy
We understand that Ofwat intends to develop proposals in this area. We anticipate this
will take place alongside the development of the second iteration of this market
blueprint.
62
8.7 Customer contracts and tariffs strategy

8.8 Wholesale contracts strategy


8.9.1 Services provided by the market operator
To enable the new retail market to function effectively, new market facilitation activities
are required, which are introduced in section 4.3.3 . For each of the facilitation activities
we have considered whether they are best performed by the MO, or another party such
as retailers, wholesalers or the regulator. Our recommended scope of services for the
MO is as follows.
Registration and switching services
The MO will administer a central register of service points in the market, and should
manage enquiries from market participants regarding data in the register.
The MO should be responsible for any allocation of retailer-less service points to
retailers (if Ofwat policy is to assign service points).
The MO should not provide customer advice, recommendation or provider
comparisons, nor should it manage enquiries from customers regarding central
registration data.
Financial settlement services
The MO should retain the master record of meter readings for use in settlement, and
perform any necessary adjustment or aggregation of this data required to perform
settlement. The MO should determine estimated usage in the absence of actual
data.
The MO should determine charges due between market participants. Invoicing and
payment handling will be managed bilaterally and not by the MO.
It should be mandatory for market participants to use the above MO services for all
direct and indirect services in the market, except for non-standard agreements
where the MO systems and processes would require change to deliver the services;
these should be managed bilaterally.
The MO should not be responsible for performing on-site verification of meter
readings.
Future work will recommend what role the MO should have in relation to credit
management.
Market governance services
The MO should administer market codes and the code modification process, provide
secretariat functions to code panels and working groups, and administer accession
to codes during market entry and exit.
If the need for such services is defined in Ofwats forthcoming work on market
governance, the MO should carry out monitoring and reporting of market code
compliance, and have delegated authority to issue warnings and financial and non-
63
financial penalties for low-level infractions. Enforcement of significant market issues

should not be performed by the MO.
If the need for such services is defined in Ofwats forthcoming work on market
governance, the MO should administer, but not arbitrate on, market disputes.
The MO should produce and publish market statistics.
The MO should provide training on codes, processes and systems to market
participants.
Customer awareness services
The MO should not be responsible for customer awareness campaigns, and should
not be responsible for publishing a record of licensed retailers.
Industry data exchange services
The MO should be responsible for transmitting, validating and storing all standard
market messages between participants. It should be mandatory to use this MO
service.
The MO should provide the capability for transmitting and storage (but not
validating) non-standard electronic messages, and use of this service should be
optional.
8.9.2 Delivery model

To deliver the recommended services the MO will require a series of strategy,
management, and operational functions, as well as supporting IT systems, to be
developed or procured. Ofwat will be carrying out work to determine how best to
ensure that these capabilities are delivered to the required standard and delivering
good value. We recommend to Ofwat that:
there should be a single MO providing all of the identified services;
the following MO business capabilities should initially be in-sourced/built:
o MO strategy;
o procurement and contractor management;
o business operations; and
o market governance and MO change management;
the following MO business capabilities should initially be outsourced/procured:
o IT system build, operate and change; and
o market operations;
the procurement process should determine if out-sourced services and systems are
best provided by one or multiple vendors.
8.9.3 Ownership and governance model

For the MO to carry out business, it will need to be established as a legal entity. Ofwat
will be carrying out work to consider what type of entity it should be, and who owns and
governs it. We recommend to Ofwat that:
the MO should be a company limited by guarantee;
the MO should be a private sector organisation, owned by all market participants;
the MO should be governed by a Board comprising an independent Chair, a majority
of independent members, and nominated representatives of incumbent and new
entrant water companies; and
Ofwat should not be an owner of the MO, and should not be a member of the MO
Board. Ofwat should control the MO through market codes.
64
8.9.4 Commercial model

The cost of providing the MO services will need to be recovered and a clear
commercial model for the MO put in place. Ofwat will be carrying out work to consider
what the appropriate commercial model is. We recommend to Ofwat that:
the MO should be a not-for-profit entity, but providers of outsourced services should
be permitted to make a profit;
MO funding should be on the basis of cost recovery from members/owners, with
risks not borne by outsource providers backed off to members/owners;
MO set-up costs should be paid for wholesalers, in a manner which does not impose
costs on household customers, with the split of costs proportionate to the number of
service points each wholesaler has. If it demonstrates good value, the procurement
process should choose proposals from vendors to finance some set-up activities,
with costs recovered during market operations; and
MO operational costs should be paid for 50% by wholesalers and 50% by incumbent
retailers, new entrant retailers and self-supply customers. Wholesalers share of the
costs should be split proportionate to the number of service points, in a manner
which does not impose costs on household customers. Retailers share of the costs
will be split based on proportion of service points and wholesale charges.

8.10.1 Required market operator IT systems
To enable the MO to deliver the recommended services to market participants in the
areas of registration and switching, financial settlement, market governance, and
industry data exchange, IT systems will be required, most notably:
a registration system and database;
a meter reading preparation system, charge calculation system, and associated
databases;
a management information/business intelligence system; and
an industry data exchange hub, including a message validation system and
message database.
8.10.2 Industry data exchange hub interface approach

We recommend that the MO should be responsible for co-ordinating data exchange
within the industry. To enable this, an industry data exchange (IDEX) hub should be
created, through which market participants send and receive data. Reflecting the
differing frequencies with which different market processes will be employed, and the
differing scale of market participants, we recommend that the following three types of
interface should be implemented.
An automated interface, expected to be for machine-to-machine communication and
used for transferring large volumes of data at low cost.
A semi-manual interface for participants to upload data files to and download data
files from manually, to be used as a contingency or as a low cost alternative for new
or small market entrants with lower volumes of data to be transferred.
A manual interface such as set of secure web forms to enter data into manually, to
be used as a contingency or as a very low cost alternative for new or small market
entrants with lower volumes of data to be transferred.
65
8.10.3 Market data model

The recommended data model for the market, and specifically for the MO, includes:
for registration and switching, a centrally held record of premises, service points,
and associated meters and market participants. We recommend that the central
data model should not hold customer-level data;
for operational services, a centrally held record of service requests and notifications;
for metering and financial settlement, a centrally held record of meter readings,
wholesale charging schemes, and derived wholesale charges.
8.11 Codes architecture

We understand that Ofwat intends to develop proposals in this area. We anticipate this
will take place alongside the development of the second iteration of this market
blueprint.
8.12 Upstream considerations

66
Appendix A: Consultation
questions and approach
Consultation questions
We are seeking views in relation to the following questions posed throughout this
document.
BP 3a: Do you agree with the recommended scope of the English non-household
retail market?
BP 4a: Do you agree with the recommendation to Ofwat that for standard services,
agreements and interactions, all market participants should be required to make use
of the MOs services?
BP 4b: Do you agree with the recommendation to Ofwat that market participants
should be allowed to request dispensation from any requirement to interact through
the MO in circumstances where: the parties interacting are related; and/or where
services, interactions and agreements are considered to be non-standard?
BP 4c: Do you agree with the recommendation that service points served under a
WSL combined supply agreement should be registered with the market, but that the
financial settlement and managing of operational services should have to be
administered bilaterally between the relevant market participants, until the
introduction of full upstream competition in 2019 or later?
BP 5a: Do you agree with the recommendation that customers should be required to
apply for trade effluent consents through their chosen retailer of trade effluent
services?
BP 5b: Do you agree with the recommendation that new entrant retailers should be
permitted to choose whether they offer a trade effluent consent handling service?
BP 5c: Do you agree with the recommendation that wholesalers should not be
permitted to communicate with the customer directly during the consent application
process, except on matters related to compliance and enforcement?
BP 5d: Do you agree with the recommendation that the customer should be
required to interact directly with the Environment Agency to obtain a discharge
permit?
BP 5e: Do you agree with the recommendation that trade effluent billing frequency
and payment terms should be the same as for other sewerage services?
BP 5f: Do you agree with the recommendation that if the retailer requires additional
sampling and analysis for the purposes of customer billing (beyond that required for
compliance and enforcement) this should be the responsibility of the retailer?
BP 5g: Do you agree with the recommendation that wholesalers should be required
to offer their trade effluent sampling and analytical services to retailers on a
reasonable and non-discriminatory basis?
BP 5h: Do you agree with the recommendation that existing trade effluent charging
agreements should be split into a wholesale element and a retail element (margin)?
BP 6a: Do you agree with the recommendation that developers interact with
retailers of developer services, and that the retailing of developer services should
be a separable service to the retailing of water and sewerage services?
BP 6b: Do you agree with the recommendation that administration and customer
service related to developer services should be the responsibility of the retailer of
67
developer services, irrespective of whether the development is household, nonhousehold or mixed?

BP 6c: Do you agree with the recommendation that registration of new premises,
service points and services should be the responsibility of the retailer of developer
services and not the wholesaler?
BP 6d: Do you agree with the recommendation that interactions between the
developer and wholesaler should be through the retailer of developer services?
BP 6e: Do you agree with the recommendation that all developer service payments
should be managed through the retailer of developer services?
BP 6f: Do you agree with the recommendation that the developer should not be
permitted to change the retailer of developer services they interact with for a
particular site during the payment period?
BP 6g: Do you agree with the recommendation that the developer should not be
permitted to switch to another retailer of developer services for payment
arrangements related to completed developments?
BP 7a: Do you agree with the recommendation that organisations providing subcontracted and associated services should by default interact with the market and
the MO through the party on whose behalf they are working/who appointed them?
BP 7b: Do you agree with the recommendation that the MO should not be permitted
to offer sub-contracted and associated services?
BP 7c: Do you agree with the recommendation that the MO should be permitted to
negotiate bilateral access agreements to MO systems and market data on a
commercial basis with organisations providing such services?
In addition, in other high-level design papers we are seeking views on the following
recommendations which are repeated in this paper. If you have views on any of these
recommendations, please refer to the relevant paper for details on how to respond:
In the market operator target operating model:
The recommended scope of the English non-household retail market.
The recommended scope of services provided by the market operator related to
market governance.
In the registration and switching strategy:
The recommendation that registration and customer switching should be at the
service type level.
The recommended scope of services provided by the MO related to registration and
switching.
The recommended scope of services provided by the MO related to customer
awareness.
In the financial settlement strategy:
The recommended scope of services provided by the MO related to financial
settlement.
In the systems architecture and data model:
The recommended scope of services provided by the MO related to industry data
exchange.
Consultation approach
Please provide your responses to the above consultation questions and any other
comments you may have regarding this paper by 14th February 2014, to
68
feedback@open-water.org.uk. We provide an accompanying template for responses

on the Open Water website to help this process, which we strongly encourage
respondents to use. We will, however, accept responses in other formats if necessary.
In addition, we will be running a workshop on 29th January for representatives from
water companies to discuss the content presented in all of the high level design papers.
Details of this session have been shared with water companies, and for more
information please contact feedback@open-water.org.uk.
69
Appendix B: Glossary of
terms
For a full glossary of terms used in this document please refer to the Open Water
programme Glossary of Terms, available at www.open-water.org.uk.
70
Appendix C: Customer
expectations assessment
Open Water has previously identified that to achieve the objectives of water market
reform it is critical to ensure that customers expectations of a competitive water retail
market are understood and considered in the market design. To achieve this work has
been undertaken33 with the objectives of:
Understanding what customers expectations are of a competitive water market;
Identifying whether customer expectations will be met through market design, or left
to market competition and innovation; and
Where the need for market design has been identified, agreeing what the Open
Water programme will deliver, what will be delivered elsewhere, and what
expectations will not be met.
The customer expectations defined through this work have been considered in the
relevant strategy and high level design documents. As no customer expectations have
been mapped to the market blueprint, accordingly no assessment has been carried out
in this paper. Assessments are provided in the supporting individual strategy papers
for example, financial settlement and operational services.
33
Document available at: http://www.open-water.org.uk/documents/.
71
Appendix D: Working group

comments
Open Water held a working group on the 5th November 2013 to seek feedback
regarding the recommended Market Blueprint from experts in the water industry and
competitive utility markets.
The sentiment of the attendees was that:
The recommendations regarding market arrangements for water and sewerage,
trade effluent, and subcontracted and associated services were generally endorsed.
A number of refinements and challenges were suggested which have been
considered.
The recommendations regarding market arrangement for developer services were
not endorsed with a series of issues and opportunities highlighted. As a
consequence these recommendations have been reworked.
The working group identified and discussed a wide range of subjects. Some of the key
points and our commentary in response are provided below. Note, many of the points
raised were not directly related to the Market Blueprint, for example comments about
the governance of Open Water, and as such are not included in the information below.
Points which were also raised in previous working groups, e.g. those related to the
market data model, are not presented here and readers should refer to the relevant
papers.
Working Group comments and questions
Commentary
Market Scope
Debate was had regarding Highways Drainage and
in particular the link to development of sewerage
systems. There was general endorsement that
highways drainage is a societal cost incurred by the
wholesaler, the cost of which should be recovered
through a tax on other sewerage service charges.
Accordingly we have not changed our

recommendations in this area since the working
group. See Section 3.1 Comments regarding
developer services were considered in changes
made to developer services in Section 6.3
Market Scope
The recommendations regarding the scope of the
market were generally endorsed. (Noting the above
point regarding highways drainage).

group. See Section 3.1 .
Market arrangements for water and sewerage:

switching level
There was debate regarding the pros and cons of
switching at the premises level versus the service
point level.
These points have been considered in changes

mastered in the Registration & Switching strategy,
and supported by a new options analysis considering
at what level switching should occur. Since the
working group we have changed our
recommendation such that switching occurs at the
service type level, e.g. a customer can switch their
foul sewerage services and surface water drainage
separately (if they can be separately measured), but
they must purchase all services of a particular type
from one retailer for a premises, e.g., if a customer
has three potable water supplies at one premises
they must select a single retailer for these services.
This change is reflected in Section 4.3.1 of this
document.
72
Commentary

customer eligibility
It was asked who decides who is eligible.
We will not be setting out more detail in high level

design, but Ofwat will be issuing eligibility guidance
and we would encourage Ofwats work on market
governance to consider a dispute process for
eligibility issues.

definition of roles in the market
The recommendations regarding the roles in the
market were generally endorsed.

group. See Section 4.3 .
Market arrangements for water and sewerage: use

of the Market Operator
The recommendation that use of the Market
Operators (MOs) services should be mandatory for
related participants was discussed at length.
Generally sentiment was that for financial settlement
and registration and switching this was an
acceptable recommendation, but that for operational
services this was more challenging due to the close
integration within incumbent companies.
Since the working group Ofwat have advised us that

they consider this a level playing field issue which
they will provide a decision on. We maintain our
recommendation (now to Ofwat) that use of the MO
should be mandatory for related participants. See
Section 4.3.3 for more detail.
Market arrangements for water and sewerage: use

of the Market Operator
It was debated who should run any dispensation
process regarding mandatory use of the MOs
services. The general suggestion was that it should
be Ofwat.
Since the working group Ofwat have advised us that

they consider this a level playing field issue which
they will provide a decision on. We now present a
recommendation to Ofwat that Ofwat should run the
dispensation process. See Section 4.3.3 for more
detail.

evolution of market roles
The recommendations regarding the evolution of
roles in the market were generally endorsed.

group. See Sections 4.4 , 4.5 and 4.6 .

evolution for customers
The recommendations regarding customers staying
with their present retailer until they choose to switch
were generally endorsed.

group. See Sections 4.4 , 4.5 and 4.6 .

evolution for customers
Points were raised regarding customers on existing
special agreements and whether they would be able
to switch retailer.
Since the working group we have formed a

recommendation that special agreements should be
split into a wholesale and retail element and that
customers on such agreements should be permitted
to change retailer on market opening. See Section
4.3 for more detail.
Market arrangements for trade effluent: consenting

The recommendation that consents are granted by
wholesalers but the customer contact is through the
retailer was generally endorsed, with a
recommendation to clarify that the wholesaler will
need to contact the customer in certain
circumstances.
Accordingly we have modified the wording but not

the sentiment of recommendations in this area since
the working group. See 5.3.1
Market arrangements for trade effluent: charging

The plan to consider who is responsible for
determining trade effluent charges in 2014 was
discussed. Scottish attendees shared their
experience that this has been a challenging and
changing area in their market, and that their view is
that this should be done by the MO.
We will consider this in 2014 as a discrete piece of

work.

Potential issues where trade effluent charging is
based on sub-meters and/or customer meters were
raised.
We will consider this in 2014 as part of our Metering

Strategy.
73
Commentary

The recommendations regarding trade effluent
charging were generally endorsed. (Noting the
above points regarding responsibilities and
metering).

group. See Section 5.3.1
Market arrangements for trade effluent: compliance

and enforcement
Points were raised by attendees regarding
responsibilities for sampling and analysis where this
is required for billing purposes and not for
enforcement purposes.
Since the working group we have developed a

recommendation that such sampling should be the
responsibility of the retailer, but that wholesalers
should make their sampling and analysis services
available on a non-discriminatory basis to retailers.
See Section 5.3.1
Market arrangements for trade effluent: compliance

and enforcement
The recommendations regarding trade effluent
compliance and enforcement were generally
endorsed. (Noting the above point regarding
sampling for billing).

Market arrangements for developer services: roles

and activities
Points were raised regarding additional DS activities
such as engineering design, which are not reflected
in the recommendations.
Since the working group we have refined our

recommendations based on these points. See
Section 6.3.1 for more detail.
Market arrangements for developer services: roles

and activities
It was discussed that SLOs act as the conduit
between the developer and wholesaler all ready and
as such adding in a retailer to undertake these
customer service type activities may be inefficient
Since the working group we have developed the

concept of the retailer of developer services, and
that (i) it should be made simple for SLOs and similar
organisations to act as a retailer of developer
services and as such compete with water retailers,
and that (ii) retailing of developer services should be
separable from retailing of water and sewerage
services. See Section 6.3.1 for more detail.
Market arrangements for developer services:

administration and customer services
The options for which types of developments
(household, non-household, mixed) go through
which type of retailer was discussed. It was generally
endorsed that all developments of all types going
through a single retailer was simpler for developers.
Since the working group we have changed our

recommendations to reflect the working groups
views. See Section 6.3.2 6.3.1 for more detail.

administration and customer services
It was raised that encouraging new entrants to
provide developer services may be challenging and
may limit competition.
Since the working group we have developed the

concept of the retailer of developer services (see
above). We recommend this is separable from
retailing of water and sewerage services to
encourage new entrant retailers specialising in
developer services. We have also recommended
that incumbent non-household retailers should be
obliged to provide these services, but that new
entrant water and sewerage service retailers should
not. See Section 6.3.1 for more detail.

engineering works
The recommendations regarding developer services
engineering works were generally endorsed.


payment handling
A number of points were raised regarding the nature
and determination of charges for developer services,
for example whether payment over 12 years was
appropriate and how ex-post charge calculation
based on actual site consumption is to be managed
in an unbundled market.
We present these points in Section 6.2.4 to Ofwat,

who will be undertaking work on charging for
developer services shortly.
74
Commentary

payment handling
The recommendations regarding developer services
payment handling (that they go through the retailer)
were generally endorsed.

Market arrangements for subcontracted and

associated services
Points were raised regarding meter reading as a
service, and if wholesalers had to offer meter reads
for legacy AMR reads, whether these should pass
through the Market Operator.
We will consider this in 2014 as part of our Metering

Strategy. We highlight that we have made no
recommendations regarding how data from legacy
AMR systems should be made available.

associated services
It was discussed whether Bristol and Wessex Billing
constituted an outsource provider and what
complexity this would lead to for them to interact with
the MO.
We consider BWBSL to be an outsource provider

and as such our default position would be that they
would have to pass data through their parent
company (i.e. Bristol Water and Wessex Water) who
in turn would interface with the MO.
However, we propose a pragmatic approach to
agreeing interfaces with participants, and would
consider such circumstances on a case-by-case
basis.

associated services
The recommendations regarding subcontracted and
associated services were generally endorsed.
(Noting the above points regarding meter reading
and BWBSL).

group. See Section 7.
75
Appendix E: Market
consistency assessment
Open Water has previously identified that to achieve the objectives of water market
reform it is highly desirable, and in many areas absolutely necessary, to have
consistency in the market design. The discussion document published by Open Water
on The New Retail Market for Water and Sewerage Services34 outlined that the Open
Water programme will work to: Ensure an appropriate level of consistency in the
market design, such that the expected benefits of water competition are realised. This
discussion document goes on to explain that the programme will work to ensure
reasonable consistency:
for all market participants, principally customers, retailers, and wholesalers; and
in all dimensions across which a customer, retailer, wholesaler or other market
participant may require or desire consistency. This includes, but is not limited to,
consistency across country, wholesale region or any other geographic boundary;
customer segment; and product/service.
In producing the retail market design set out in this document, the requirement to
ensure reasonable market consistency has been considered. In the following sections
an assessment is provided as to how well we believe the main elements of the design
achieves that requirement in terms of consistency with the Scottish market, and
consistency against other criteria.
34
Document available at: http://www.open-water.org.uk/documents/
76
Consistency with the Scottish market

Area of design
Assessment35
Commentary on key items
Scope of market
High
Areas of commonality
Services provided to customers and wholesale services are
consistent with Scotland.
Market arrangements
for water and
sewerage
Medium
The definition of retail and wholesale activities recommended is
near identical with Scotland.
The requirement for wholesalers to provide services in a nondiscriminatory manner to all retailers is consistent with Scotland.
The creation of a single Market Operator (MO) to help
administer the market is consistent with Scotland (see later for
differences in the detail of services provided by the MO).
Areas of difference
Legal separation of incumbents is not required in England as it
is in Scotland. This is due to decisions presented in the Water
Bill. Associated with this, the requirement for incumbents to
create a competitive retail arm to sit alongside their in-area
incumbent retail business is unique to England.
We are proposing that registration and switching in England
should be managed at the Service Type level (e.g. potable
water), rather than the Service Group Level (e.g. water), as is
the case in Scotland. The key reasons for this are enabling
additional customer choice and to be consistent with the stated
intent of government policy of encouraging specialisation
amongst retailers.
Market arrangements
for trade effluent
High
Our recommendations regarding roles and responsibilities and
general approach for granting of consents and permits,
charging, and compliance and enforcement, are all consistent
with Scotland.
Areas of difference
As described in the assessment of market arrangements for
water and sewerage, we recommend that customers in England
can choose their retailer at the Service Type level, and hence
can choose a trade effluent retailer who is not their sewerage
retailer. We believe this is consistent with the intent of
government policy and will allow for greater specialisation
amongst retailers.
35
Definition of assessments: Low/Medium/High: the level to which the design as outlined meets
the dimension versus other reasonable alternatives
77
Area of design
Assessment35
Market arrangements
for developer services
Medium
Our recommendations regarding roles and responsibilities and
general approach for administration and customer services,
planning design and engineering works, and payment handling,
are all consistent with Scotland.
Areas of difference
We recommend that retailing of developer services should be a
separable service from retailing of water and sewerage,
whereas in Scotland it is not. We believe this will enable
organisations such as SLOs to compete with water and
sewerage retailers in this market and provide a better customer
service.
We recommend that developers interact with a single retailer for
household, non-household and mixed use developments, which
is not the case in Scotland. We believe this will provide a better
experience for developers and addresses issues advised to us
by Scottish market participants regarding ambiguity and
confusion for mixed use developments.
Market arrangements
for subcontracted and
associated services
High
All of our proposals are consistent with Scotland.
Registration and
switching strategy
Medium
Our recommendations regarding creation of a central register
and switching processes, facilitated by a Market Operator, are
Our outline view of the switching process is consistent with
Scotland.
Delivery of a customer awareness campaign by Ofwat is
Leveraging Scotland on Tap to provide a public record of
registered retailers is consistent with Scotland.
The approach of encouraging third parties, rather than the MO,
to provide retailer comparisons to customers is consistent with
Scotland.
Areas of difference
We are proposing that the registration and switching in England
should be managed at the Service Type level. (See above for
more detail).
78
Area of design
Assessment35
Financial settlement
Medium
Our recommendations that the MO should determine usage and
calculate charges, but that billing and payment handling should
be managed bilaterally, are consistent with Scotland.
Our settlement and billing periods are consistent with Scotland.
Our approach to estimating consumption is consistent with
Scotland.
Areas of difference
We recommend that the MO should be responsible for
calculating charges for operational services, whereas in
Scotland this is the responsibility of Scottish Water. We believe
the Scottish model has, through only having one wholesaler, a
degree of inherent centralisation, and to achieve the same
ends across 20+ wholesalers in England the MO should
perform this, and in turn enable reduced costs, simplicity for
retailers, and greater transparency.
Payment terms and settlement timelines are similar to Scotland
but with a few key areas of difference. In line with Ofwat
decisions the English market will not have payment in advance,
and that standard payment terms should be consistent across
services. In addition, our recommendations are that initial
settlement should occur four days later than in Scotland to allow
for more actual meter data to be communicated to the MO, and
that final settlement should be on a rolling basis and not on an
annual basis to allow for faster final settlement and levelled
workload. We believe these variations on the Scottish model
address a number of issues shared with us by Scottish market
participants.
Operational services
Medium
The requirement for wholesalers to provide services in a nondiscriminatory manner to all retailers is consistent with Scotland.
Areas of difference
Our recommendation that we should commonise the definition
of wholesale services across wholesale regions is not
applicable in Scotland as there is only one wholesaler. It is likely
that some of the services will be defined differently to those in
Scotland.
Our recommendation that service requests and notifications
should pass through the MO is different to Scotland where such
communications are handled bilaterally. We believe the Scottish
model has, through only having one wholesaler, a degree of
inherent centralisation, and to achieve the same ends across
20+ wholesalers in England the MO should perform this, and in
turn enable reduced costs, simplicity for retailers, and greater
transparency.
79
Area of design
Assessment35
Market Operator target

operating model
High
Our recommendation that the MO should provide services
associated with registration and switching, financial settlement,
industry data exchange, and market governance, are broadly
consistent with Scotland. Generally, we propose that all
services provided by the CMA in Scotland should be provided
by the MO in England, with some additional services provided
by the MO in England as noted below.
Our recommendation that use of the MO should be mandatory
is the same as Scotland.
Our recommendations regarding the delivery model, ownership
and governance model, and commercial model, are consistent
with Scotland.
Areas of difference
We recommend that the MO should be responsible for
calculating charges for operational services, which is not the
case in Scotland. (See above for more details).
We recommend that the MO should be responsible for passing
service requests and notifications between market participants,
which is not the case in Scotland. (See above for more details).
Systems architecture
and data model
High
Our recommendation of a tiered set of interfaces to the industry
data exchange hub is consistent with Scotland.
Our high level market data model is consistent with Scotland.
80
Consistency against other criteria

Market consistency dimension
Assessment
Commentary
Provides consistency across

wholesale regions for Retailers
High
We believe this is likely to be the most critical

consistency requirement for a successful market, and
that our proposed design has delivered as high a level
of consistency as is possible within the scope of the
Open Water programme. Our overall approach of
centralising new functions, such as registration and
switching, and financial settlement, and introducing
common industry processes and using a Market
Operator in these areas, will strongly support
consistency in this area.
In particular, we believe that our recommendation that
the MO should be responsible for passing service
requests and notifications between market
participants and determining operational service
charges is a strong driver of consistency for retailers,
above and beyond what exists today in the WSL
regime and Scottish market approaches.

wholesale regions for Customers
Medium
Our recommendations should provide for a consistent

approach for customer interaction with wholesalers,
via retailers, in the competitive market. However, it is
likely that customers will experience variable levels of
service from wholesalers as at this stage no
recommendations are made by Open Water or Ofwat
to standardise levels of service.

Retailers for Wholesalers
High
We believe that our proposed design has delivered as

high a level of consistency in this area as is possible
within the scope of the Open Water programme. Our
overall approach of centralising new functions, such
as registration and switching, and financial settlement,
and introducing common industry processes and
using a Market Operator in these areas, will strongly
support consistency in this area.

Retailers for Customers
Medium
Our recommendations support retailers being able to

offer a consistent set of products and services to
customers across England.
We highlight that the removal of the in-area trading
ban would help to provide greater choice for
customers seeking to deal with a single national
retailer.

non-household customer
segments
High
All of our recommendations apply equally to all sizes

and segments of non-household customers, and we
have not made variant recommendations against
customer segment in any area.
Provides consistency with

household customer segments
Low
Our recommendations will lead to a non-household

retail market which is very different to that for
domestic customers. We consider this to be a natural
consequence of governments chosen policy.

wholesale products and services
High
Our recommendations are broadly consistent across

the direct and indirect services provided by
wholesaler. For example, we recommend that the
Market Operator provides services associated with
calculating charges for both direct and indirect
services.
81
Market consistency dimension
Assessment
Commentary

retail products and services
High
Our recommendations support retailers being able to

offer a consistent set of products and services to
customers across England. By providing consistency
to retailers, e.g. in the payment terms for all water and
sewerage being the same, this should reduce risk for
retailers and enable them to offer consistency to
customers. At the same time, we have also enabled
specialisation for retailers who only wish to retail
particular products and services.
82

Market Blueprint

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Market Blueprint

Hochgeladen von

Copyright:

Verfügbare Formate

Market Blueprint

We are seeking stakeholders views on the questions set out in this

1.2 Scope of retail market reform

1.3 Recommended market arrangements for water and sewerage

1.4 Recommended market arrangements for trade effluent

1.5 Recommended market arrangements for developer services

1.6 Recommended market arrangements for subcontracted and associated

1.7 Registration and switching strategy

1.8 Financial settlement strategy

1.9 Operational services strategy

1.10 Market operator target operating model

1.11 Systems architecture and data model

1.12 Next steps

2.1 Programme background

2.2 Document purpose and context

3. Scope and vision for retail market reform

3.1 Scope of retail market reform

3.2 Vision and success criteria of retail market reform

3.3 Key perceived issues retail market reform seeks to address

4. Market arrangements for water and sewerage

4.1 Current market arrangements in England and Wales

4.2 Current market arrangements in Scotland

4.3 Future market arrangements in England

4.4 Evolution of WaSC and WOC arrangements

4.5 Evolution of NAV arrangements

4.6 Evolution of WSL arrangements

4.7 Evolution of private supply, on-site disposal, and self-supply arrangements

5. Market arrangements for trade effluent

5.1 Current market arrangements in England and Wales

5.2 Current market arrangements in Scotland

6. Market arrangements for developer services

6.1 Current market arrangements in England and Wales

6.2 Current market arrangements in Scotland

6.3 Future market arrangements in England for new developments

6.4 Future market arrangements in England for completed and in-progress

7. Market arrangements for subcontracted and associated

7.1 Present and possible future subcontracted and associated services

7.2 Assumed market arrangements

8. Market strategy and high-level design

8.1 Structure of the market strategy and high-level design

8.2 Registration and switching strategy

8.3 Financial settlement strategy

8.4 Metering strategy

8.5 Operational services strategy

8.6 Market governance and performance management strategy

8.7 Customer contracts and tariffs strategy

8.8 Wholesale contracts strategy

8.9 Market operator target operating model

8.10 Systems architecture and data model

8.11 Codes architecture

8.12 Upstream considerations

Appendix A: Consultation questions and approach

Appendix B: Glossary of terms

Appendix C: Customer expectations assessment

Appendix D: Working group comments

Appendix E: Market consistency assessment

Consistency with the Scottish market

Consistency against other criteria

1.2 Scope of retail market reform

Water Bill 2013-14. http://services.parliament.uk/bills/2013-14/water/documents.html

potable water; and

Commodity and network

Commodity and network

All non-household customers.