* Proposes easing of merger rules
* Aims to encourage new entrants to market
* Will allow easing switching of suppliers
By Nina Chestney
LONDON, July 10 The government on Tuesday
outlined plans to make it easier for water companies in England
and Wales to merge, new players to enter the market and
businesses to switch suppliers.
The draft bill reinforced changes to the water sector
proposed last December aimed at improving the industry's ability
to cope with increasing demand and the effects of climate change
like floods and droughts.
The government said reforming the water industry could save
the economy 2 billion pounds ($3 billion) over the next 30
Scotland has already made similar reforms to its water
market and its public sector alone is set to save around 20
million pounds over the next three years.
"This draft bill will create a modern, customer-focused
water industry and for the first time all businesses and other
organisations will be able to shop around for their water and
sewerage suppliers," said the Secretary of State for Environment
"By slashing red tape we will also stimulate a market for
new water resources and incentivise more water recycling."
The draft bill will be scrutinised by parliament and
industry and a realistic target date for opening the retail
water market is April 2017, the Department for Environment, Food
and Rural Affairs (Defra) said.
The proposals come as heavy rainfall continues to threaten
large parts of Britain, forcing the environment agency to
enforce seven flood warnings and 36 flood alerts in England on
The draft bill proposed removing regulations acting as a
barrier to new entrants to the water and sewerage markets.
New entrants currently must negotiate with up to 21 water
and sewerage companies in England and Wales. Instead, water
industry regulator Ofwat will set out conditions for firms to
The draft bill also proposed reforms to a special merger
regime which limits companies' ability to merge or be taken over
by more efficient competitors.
Currently, a merger proposal has to be referred to the
Competition Commission if the turnover of the buying or target
company is 10 million pounds a year or more.
Under the changes, the Office of Fair Trading and Ofwat will
consider whether a merger could harm competitiveness instead of
making an automatic referral to the Competition Commission.
At 1338 GMT, shares in listed UK water firms made very
Shares in Pennon were up 0.72 percent to 773 pence
per share and United Utilities inched up 0.37 percent to
679 pence, while Severn Trent was up 0.12 percent to
WaterUK, a body which represents the UK water industry, said
it supported the planned reforms.
"Expanding the market and offering greater choice for
business customers is the right reform at the right time," said
Pamela Taylor, WaterUK's chief executive.
Defra said the reforms will also make it easier for
businesses and public sector bodies to switch water and sewerage
supplies, allowing them to get more competitive prices and
improve their efficiency.
It will also introduce regulatory incentives to help make
water trading more attractive.