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WSL 01/07 20 February 2007
Dear Colleague
COMPLIANCE WITH SECTIONS 66D AND 66E WATER INDUSTRY ACT 1991 ('WIA91') AND APPOINTMENT CONDITION R
Some industry representatives at our Operations Advisory Group and Monitoring Advisory Group meetings have asked us whether or not appointed water companies should continue to follow our Guidance on Access Codes. This question has arisen as a result of comments by the Competition Appeal Tribunal in its judgments of 6 October 2006 and 18 December 2006 in the Shotton case.
We have already provided advice on this issue at the OAG meetings on 10 October 2006, 12 December 2006 and 9 January 2007; at the MAG meeting on 7 February 2007; and in our email of 18 January 2007 to OAG. However, and for the avoidance of doubt, Ofwat's position is that appointed water companies (and licensees) are obliged to follow our Guidance. Access agreements must be made in accordance with our Guidance (including guidance with respect to the fixing of charges) including any revisions to that Guidance made in accordance with the procedures specified in the WIA91. Furthermore, Ofwat's Guidance on Access Codes is a "legal requirement" for the purposes of the Competition Act 1998 ("CA98"), Schedule 3, paragraph 5. The CA98 Chapter I prohibition therefore does not apply to an access agreement to the extent to which it is made, in order to comply with that legal requirement and the CA98 Chapter II prohibition does not apply to conduct to the extent to which it is engaged in, in order to comply with that legal requirement.
For these reasons, and without prejudice to any future decision(s) of the CAT, our present view is that appointed water companies must continue to fix their access charges in accordance with sections 66D and 66E WIA91 and our Guidance on Access Codes, which itself is required to follow 66E WIA91. Appointed water companies are also required by Condition R of their conditions of appointment to follow Ofwat's Guidance (see in particular Condition R2(1)(a)).
Yours sincerely
Keith Mason
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