Question to the Department for Environment, Food and Rural Affairs:

To ask Her Majesty's Government what assessment they have made of reports that Ofwat is allowing SME customers in the English water retail market to be charged in advance.

While there are a range of market codes in place to protect customers, Ofwat does not specifically prohibit retailers from charging customers in advance for the services they provide. Some customers may, for example, have made an active and informed choice to voluntarily enter contractual arrangements with retailers on terms which include some form of advance billing.

However, Ofwat has also taken steps to strengthen the protections for customers on deemed contracts (that is where the customer has not actively negotiated and agreed a contract with their retailer) against non-voluntary changes in their non-price terms, which would include changes in billing arrangements. Following a public consultation, in July 2019 Ofwat published its decision that for customers acquired on retail exit who have not subsequently switched retailer, their terms in the round should leave them no worse off than they were on retail exit.

While the example of advance billing was used as one example of a non-price change that could leave customers worse off, Ofwat’s decision applied more widely to the fair treatment of customers who had not yet engaged in the market. To avoid stifling innovation or preventing retailers from making efficiency enhancing changes that may benefit customers, retailers should be able to alter the non-price terms for customers on deemed contracts so long as they are: transparent about any proposed changes; are able to clearly articulate what the impact on customers will be; and are able to demonstrate to customers why, and how, they will be at least ‘no worse off’ as a result of those changes.