Market Opening

Competition in the Water Industry in Scotland

Legislation has established a legal framework for retail competition in the water industry in Scotland for non-household customers. The Water Industry Commission has a duty under the legislation to licence entrants into the market.

Since April 2008 Licensed Providers have entered the commercial market and offer services (provision of water and waste water, billing and invoicing, customer service, complaints handling) to non-household customers.

Scottish Water will act as the Wholesale Supplier in the market and provide water and waste water services in bulk to Licensed Providers on an equal footing.

Codes and Agreements – Market Framework

In regulated utility industries, codes that set out the rules and principles of the competitive market are often used. Market participants are required to sign up to and comply with these codes. This allows the market to develop more flexibly because it avoids the need for frequent changes to licence conditions.

The following codes and agreements for the non-household retail market are in existence.

Wholesale Services Agreement (WSA)

The WSA is a legally enforceable contract between the wholesaler (Scottish Water) and a licensed service provider (for example, Scottish Water Business Stream).

The WSA covers the water or sewerage services that Scottish Water agrees to provide to licensed service providers, and the commercial terms on which those services are provided.

Operational Code

The operational code sets out the processes for dealing with day-to-day operational matters. The purpose of the operational code is to facilitate effective coordination between Scottish Water and licensed service providers.The requirement for this coordination arises due to the separation of wholesale and retail activities.

The operational code focuses on procedures and rules relating to:

• connections to the network (e.g. the information required to plan for a
  connection),
• network planning (e.g. the publication of long-term plans), and network
  operation (e.g. metering processes),
• complaints handling (e.g. the time taken for handling complaints), and
• emergencies (e.g. responsibilities for providing customers with
  information).

Market Code

The market code will set out the rules to be followed by all the participants in the new retail market. The purpose of the market code is to contribute to the creation of an effective market i.e. one in which market forces determine entry decisions and switching decisions. The market code will define:

• the processes that govern how non-household customers switch from one
  licensed provider to another, and
• the processes that allow Scottish Water to levy wholesale charges on
  each Licensed Provider.