The Covid-19 pandemic and its impact are being felt all over the globe. UK’s economy has been severely impacted by it. The Government has been making numerous forms of financial support available to all types of businesses. Ofwat, UK’s water regulator, sought input for mitigating the impact that coronavirus is having on businesses. It has also proposed several measures that would help to limit the disruption of business customers.
The Objectives of This Consultation
Ofwat has requested for views of its stakeholders to determine the steps that can be taken for protecting businesses or ‘non-household consumers’ from the Covid-19 impacts. The first objective of this consultation is to protect the interests of all their customers/end-users. This would require that business retail markets continue to function effectively.
Ofwat has stated that in case customers are unable to make payments on time due to Covid-19, the retailers must be barred from charging any interest, requesting disconnection, or imposing an additional fee for delayed payments. In cases where customers can meet payment deadlines, the retailers must use such funds to cover wholesale charges. Any money collected from customers must not be held, as it could be used for funding wholesale charges.
What Businesses Need to be Ready for
In these objectives, Ofwat has also highlighted what businesses need to be prepared for. Retailers, as well as wholesalers, must have measures to tackle any changes to the business cycle in place. Their financial viability must not suffer to provide more liquidity. They should also be incentivized for exploring and using any additional channels of liquidity, such as government support, before deferring their wholesale charges.
Additionally, there should be an incentive to pay back wholesale charges as soon as they can.
The existing market arrangements require retailers to be able to effectively manage risks that may come with non-household customers not being able to make payments. Similarly, wholesalers are also expected to be able to manage the risks that may come if business retailers’ default.
The arrangements that are in place for giving additional liquidity to the market due to Covid-19 could lead to an increase in bad debts. In this scenario, retailers could recover a portion of such costs from their non-household customers However, customers should not be expected to bear the brunt of more risks. Incentives should be there for companies that keep the best interest of customers and the market in mind.
Helping Businesses Meet their Running Costs
Ofwat, with assistance from Market Operator Services Ltd, put into work several retail code modifications at the end of March. These were aimed at ensuring that the businesses affected by coronavirus would not be pursued for non-payment of their water bills. It also aimed to minimize the effect of retailer failure to business consumers and trading parties that run operations in it.
The measures proposed by Ofwat included deferring payments for wholesale customers as well as using a ‘temporarily vacant flag’. This flag would signify that the closed business is not utilizing any water. Ofwat also began a consultation on these proposed methods keeping customer interest in consideration.
Questions Raised by Ofwat
Ofwat requested its stakeholders to share their views on the objectives that they have set out. These objectives would be their guideline for choosing the preferred options. They have also asked retailers about what portion of their wholesale charges are they able to recover from customers, excluding those who have a temporary vacancy flag. It specifically asks them to provide details about customers that are open for business but are either late in paying or not paying at all. In addition to this, it also sought their views on how they expect this to change in the coming 2 months.
These are unprecedented times, and Ofwat is trying to keep the interest of all its business customers in mind as it drafts measures to help them. Stakeholders can share their views with Ofwat by April 21, 2020.