Ofwat has published its final decision on changes to retail price caps. These price caps apply to smaller business customers (consuming less than 0.5Ml per year) who have not engaged in the market, for example, by switching retailers.
On average, across all regions in England, Ofwat’s decision will lead to final bills for business customers on a dual (water and wastewater) metered tariff increasing by around 6.4%, before inflation. The change in price caps will enable efficient retailers to earn a fair return whilst supporting the long-term stability of the business retail market that will benefit customers.
The proposals only affect business customers, they do not affect household customers.
Ofwat has also decided to simplify the price caps applying to smaller business customers by moving from the existing model of price caps varying on a regional basis, to an England-wide national price cap. This will ensure that price caps are more reflective of the costs to serve smaller business customers, which Ofwat has concluded do not vary on a regional basis.
The new price caps will be introduced from April 2023. To help manage the impact on business customers, Ofwat will transition the introduction of the new price caps over a two-year period, including by limiting annual changes in customers’ retail charges to no more £60 per year, before inflation.
Georgina Mills, Business Retail Market Director at Ofwat said:
“Our price caps ensure the business retail market is fair for small businesses that don’t shop around as much as much as larger businesses do. We need to make sure that these caps are at the right level, so that efficient water retailers can cover the costs of supplying their customers and small businesses don’t pay more than they should.
“We have listened to feedback over the consultation period and carefully considered all views. We know that these are challenging economic times but the actions we’re taking today will support stability in the market, while continuing to protect smaller business customers.”
Ofwat plans to review these price caps again in 3-5 years’ time.
Read the full Ofwat business retail market review here report here
