11 May 2006 | Anusha Bradley

Utility buyers have been denied access to reduced bills and greater competition because water companies are blocking moves to open up the market.

Legislation that came into force in December allows new water suppliers to apply for licences to provide water to major consumers, such as paper mills, power companies and chemical manufacturers. The aim was to increase competition and encourage a better service and cheaper bills.

But few advances have been made and water regulator Ofwat has now written to water companies expressing "disappointment at the lack of progress". It accused some of refusing to sign wholesale agreements with new suppliers, without which customers cannot change supplier.

Ofwat has so far granted four licences and received one further application. Once granted, licensees can apply to water firms to access their supply and arrange for the transfer of customers. Water firms have 40 working days to complete these agreements. But so far no major consumers have transferred to new suppliers.

Chris Lewis, CIPS energy committee member for water, said: "Users want to change supplier to mitigate the steep recent price increases and because they have been frustrated in their dealings with existing suppliers."

Peter Hooker, chairman of the Major Energy Users Council's water and effluent group, said: "There are some big names frustrated at the lack of progress."

The Consumer Council for Water said it had received a "stream of complaints" from major users and new licensees about incumbent suppliers.

Licensee Albion Water - which has only one customer, an arrangement that predates the new law - has accused Welsh Water of overcharging and Ofwat of not doing enough to promote competition. It has taken both organisations to the Competition Appeal Tribunal to challenge the way the law allows water firms to calculate the wholesale price. As it stands, new suppliers are only offered a 1 per cent difference between the wholesale and retail price. A decision is expected this month.

Jerry Bryan, managing director of Albion, said: "This is a landmark case. If we lose, prospects for water competition are bleak."

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