The Competition and Markets Authority (CMA) has found Pennon’s purchase of Sumisho Osaka Gas Water UK (including its subsidiary Sutton and East Surrey Water), could harm Ofwat’s ability to make comparisons between water companies and carry out its statutory functions.
Pennon Group plc (Pennon) and Sutton and East Surrey Water plc (SES) are two water utility companies that provide water and services, such as leak detection and water treatment, to household and non-household customers in England.
A fast-track Phase 1 investigation by the CMA has found that Pennon’s purchase of SES could impact Ofwat’s ability to make comparisons between water companies, as part of its regulation of the supply of water to household customers by removing SES from Ofwat’s dataset and reducing the number of comparators available for it to estimate cost allowances and set service quality targets.
Ofwat regulates the supply of water and sewerage services to household customers in England and Wales. Mergers between water and sewerage companies are subject to a separate review process to ensure that deals do not prejudice Ofwat’s ability to make comparisons in order to carry out its statutory functions, such as setting price controls on regulated water companies, monitoring and enforcement, and setting best practices in the industry. The CMA has engaged with Ofwat throughout its investigation.
The merging businesses conceded that the deal could have a detrimental impact on Ofwat’s ability to make comparisons in order to carry out its statutory functions.
Joel Bamford, Executive Director of Mergers at the CMA, said:
“Water services are vital to our day-to-day lives, whether at home or in the workplace, and we’re concerned that this deal could impact Ofwat’s ability to make comparisons and carry out its role of regulating the water sector.
“We will now carefully consider the solutions put forward by the companies and seek views from Ofwat to determine whether they address our concerns.”
More information can be found on the Pennon / SES case page.