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Ofwat launched the review and sought the views of major stakeholders after it became clear that the Water Supply Licensing (WSL) regime was not delivering effective competition. The review also looked at inset appointments and self-lay. The WSL regime was introduced by the Water Act 2003 and went live in December 2005. It enables businesses and other organisations that use at least 50 million litres of water a year (50 Ml/y) to change water supplier to a new water supply licensee. But although Ofwat has granted seven water supply licences, no consumers have switched so far. Ofwat's internal review identified limited areas for short-term change, and it will now consult on revisions to its WSL guidance to stimulate competition. The review also found that overcoming some of the constraints to the development of competition would require changes to legislation. Without these changes the expectation is that Ofwat's proposed revisions will not be enough to allow WSL competition to be more effective. Two aspects of the current legislation in particular – the Costs Principle and the eligibility threshold – are major constraints on competition. The Costs Principle requires companies to follow a very prescriptive method for setting prices for access to companies' networks that produce margins that are too low to encourage retail competition. Ofwat too must follow the Costs Principle when giving guidance on access prices. The eligibility threshold of 50 Ml/y allows for only a very small potential market. Ofwat will also set out further ideas for longer-term change in a wide-ranging consultation to be launched in the summer. As part of the consultation process over the coming months, Ofwat plans to seek stakeholders' views on the future of competition in the water and sewerage industry. Keith Mason, Ofwat's Director of Regulatory Finance and Competition, said: "We take our duty to promote competition very seriously and are disappointed by the lack of progress. We want to see effective competition in its most appropriate form across the whole range of water company activities. This will benefit consumers and the water industry as a whole." Notes to Editors 1. The Water Services Regulation Authority (Ofwat) is the economic regulator of water and sewerage companies in England and Wales. It exercises its powers in a way that it judges will allow companies to carry out their functions properly, and finance them. Its duties include protecting the interests of consumers, wherever appropriate by promoting effective competition.  | ||||||
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