Welsh Water: Minister to protect firm from competition

The UK government wants to see more competition, but the Welsh government says it will veto any changes here

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Welsh Water will be protected from competition to supply businesses, the Welsh government has vowed.

The UK government's Water Bill is to give business, charity and public sector customers a choice of water suppliers, ending the current monopoly.

But the Welsh minister responsible for water, Alun Davies, says he will not allow Welsh Water to face competition.

The UK government said it was working with its Welsh counterpart and would not be "forcing competition on Wales".

The not-for-profit firm is the only one of its type and Mr Davies said it was envied across the UK.

It has no shareholders, and profits are reinvested in the business rather than paid out in dividends.

Mr Davies said: "What we have is a made in Wales solution, something which is the envy of people right across the United Kingdom - let's not endanger what we have with these experiments.

Start Quote

Water is a very substantial part of our costs - if competition brings down the cost to me then I would have to look at that”

End Quote Buster Grant Brecon Brewing

"It's delivered increased investment, it's delivered lower bills, it's delivered a better environment for us in Wales, and it's delivered a more efficient industry. What we don't want is for that delivery to be disrupted or possibly broken by an experiment driven by ideology".

Mr Davies warned against any interference from Westminster in water policy in Wales, calling the current intervention powers of UK ministers "an affront to our democracy".

Wales Office Minister Stephen Crabb said: "We are working closely with the Welsh government in finalising the Water Bill and have no intention of forcing competition on Wales.

"However, making sure we have enough water is one of the major challenges we face in coming years. The changes we are making to the water industry will encourage economic growth and build resilience for the future."

Some heavy users of water in Wales said competition in the industry could be healthy.

Brecon Brewing uses nearly three-quarters of a million litres of water every year, and its head brewer Buster Grant said: "In principle it must be a good plan on the basis that competition hopefully drives a free market that hopefully brings down costs to people like us.

"I wouldn't say I'm in any way dissatisfied with what we have at the moment - Brecon water is world renowned.

"But water is a very substantial part of our costs - if competition brings down the cost to me then I would have to look at that," he added.

Welsh Water managing director Nigel Annett, who was responsible for developing its business model, said: "Being not for profit means that we can raise finance for investment very cheaply.

Cheaper finance

"If we have competition, that brings all sorts of risks to bear - if that increases the cost of finance, that means higher bills.

"So our argument would be that being not-for-profit, being a public service company, being integrated, is the best way to give customers the very best value and also the very best service as well."

Start Quote

...being not-for-profit, being a public service company, being integrated, is the best way to give customers the very best value and also the very best service as well”

End Quote Nigel Annett Managing director, Welsh Water

Professor Huw Dixon from Cardiff Business School said international studies had shown that competition played a key role in driving efficiency and lowering costs for consumers.

He said: "If you're in a monopoly, you don't have the same incentive to innovate and to cut costs as you do if you face competition.

"If you face competition then you have to, otherwise you die, or you diminish in size quite rapidly, whereas if you have a statutory monopoly then you don't face that threat.

"If companies don't have competition, then they tend to become a bit lazy, they don't pay as much attention to keeping costs down, and they just try and raise prices as much as they can, and there's less to stop them.

"With competition, that forces them to keep prices down, and they need to keep their costs down relative to their competitors".

If passed, the Water Bill will have a major impact on way the industry works. It will allow all business, charity and public sector customers to switch their water supplier in order to increase competition, and make it easier for new companies to enter the water market.

It will also become easier for water companies to trade water with each other, which should help manage droughts better.

The bill will apply to England and Wales, and a small number of provisions will extend to Scotland.

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