31/08/10
Ofwat has published 'Valuing water: How upstream markets could deliver for consumers and the environment'.
The latest in Ofwat's stream of policy papers and focus reports contains proposals previewed as a competition 'straw man'.
If the diffidence seems uncharacteristic, it may be because this is the most detailed account to date of Ofwat's commitment to restructuring the industry. While presented as just a collection of ideas, the implications are far-reaching.
The paper argues for the importance of valuing and trading water as a commodity. The best way is through regulated markets which would provide more information and enable better strategies for managing scarcity, regional imbalances and investment.
In devising the straw man, Ofwat has looked at approaches suggested by academics and examples from other industries. The paper moves from the complexity of the proposed new industry structure to a section on benefits for existing players - lower bills, more choice, more efficient use of water resources - and new players - easier entry, ability to negotiate packages between upstream and existing suppliers.
In Meeting Future Challenges, its blueprint for policy action, Water UK points out that Ofwat's current incentive regime is a barrier to trading, and reform could help deliver the benefits identified in 'Valuing water'.
Valuing water: How upstream markets could deliver for consumers and the environment
