This paper has been produced by ACE to explore the potential of regulatory and market reforms within the water sector.
In particular this paper looks to address the relatively low levels of consumer competition, supply competition, the inadequate levels of investment and the environment under which investment takes place.
To resolve some of these issues the paper makes the following recommendations for the government's water white paper, suggetsing it should consider:
Introducing competition into the consumer and supplier markets by allowing private companies to run and compete in these areas;
Creating of an independent (ownership unbundled) network system operator(s);
Requiring non-discriminatory third party access to the network from network system operators;
Allowing price signals to guide investment;
Breaking the current investment cycle, allowing network investment to occur over longer periods according to detailed investment plans, whilst companies that own private water producing/treatment facilities invest on a rolling basis given market price signals and consumer needs;
Creating conditions that would allow new entrants to enter the market, and create competition between existing water suppliers. For example, companies outside of the water sector may wish to enter to provide bundled services (gas, electricity and water);
Putting in place regulatory conditions that create an easy switching environment, to encourage switching rates;
and having the water regulator oversee the operation of the market and ensure competition and standards are met, rather than directly setting investment and consumer pricing signals.