High Court Backs OFWAT Policy on Inset Appointments

11 Dec 2009

The High Court yesterday dismissed an application by Dŵr Cymru (Welsh Water) for judicial review of Ofwat’s policy on “inset appointments” made under section 7(4)(b) of the Water Industry Act 1991 (“the Act”).

That section allows Ofwat to appoint a new operator to replace the incumbent water and sewerage operator on unserved sites (usually development sites).  Over 20 inset appointments have been made.

Ofwat’s policy is to grant inset appointments to applicants who can show both that they can operate the appointment on a sound financial basis and that consumers on the site will be no worse off than they would be with the incumbent.  Welsh Water argued that that policy was unlawful: in its view, Ofwat was required by the Act to find that an incumbent would offer positive advantages to consumers on the site before it could grant an inset appointment.

In a judgment given orally at the close of argument yesterday, Mr Justice Mitting accepted Ofwat’s evidence that its “no worse off” policy had led to benefits for water customers generally, and held that nothing in the Act precluded that policy.  The Judge also rejected an argument by Welsh Water that Ofwat’s policy failed to comply with social and environmental guidance issued by the Welsh Assembly Government, observing that that guidance could not displace Ofwat’s general duty under the Act to promote competition.

Ofwat was represented by John Swift QC, George Peretz, and Ewan West.  A transcript of the judgment is expected to be available shortly.

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John Swift QC
George Peretz
Ewan West