Ofgem proposals (74 pages, PDF) to direct electricity distribution network operators through new licence obligations (12 pages, scanned PDF) to implement specific methods for setting the structure of access charges to their networks.

The main proposals are:

• Access for EHV demand and EHV generation should be priced using WPD's long-run marginal incremental cost modelling method, with an increment size of 100kW for both demand and generation.

• In estimating long-run marginal incremental costs, a notional demand growth rate of 1 per cent a year should be used, irrespective of actual or prospective growth rates for a distribution network area or the relevant network elements. This global assumption is only said to be appropriate if “applied in a modelling context of a long run charging model”.

• The long-run marginal incremental cost should be converted into an annual charge using a 40-year annuity, irrespective of when the notional incremental investment expenditure is estimated by the model to be required.

• In estimating the notional costs of meeting the notional 1 per cent demand growth and the notional increments, network capacity should be calculated by reference to thermal constraints only. Costs associated with fault-level constraints should be recovered through connection charges. But “this is an area we would expect DNOs to keep under review”. The document does not say what happens to the new “common distribution charging methodology” if such reviews conclude that fault levels are important in some companies' networks and not in others.

• If applying Ofgem's model and assumptions “is considered to produce 'excessive' charges that are considered to be in breach of competition law”, distribution companies should “discuss the matter with [Ofgem]”, and (unless the common methodology is fixed) “propose suitable alternative arrangements ... based on their best assessment of the long run incremental cost of providing capacity at that point on their networks”.

• The 1 per cent notional growth figure is set by Ofgem, but “distributors should keep this growth rate under review” and it should be reset at each quinquennial price control review. The document does not say on what basis these reviews should take place, given Ofgem's decision to ignore companies' information on actual or prospective growth rates in setting a global notional number, or what should happen when different distribution companies' reviews find that different growth rates would be reflective of their circumstances.

• For HV and LV network elements, unit costs should be based on a bottom-up cost model for a 500 MW increment covering all aspects of its HV/LV network that are not covered by connection charges. The cost should be allocated between classes of customers on the basis of estimated peak-time load.

The main missing elements are:

• “[Ofgem] encourage[s] DNOs to develop a common methodology for IDNO charging as soon as possible” and “requires DNOs to work with IDNOs on this area of work”. But “given [Ofgem's] concurrent powers under competition law” Ofgem does not think that it would be “appropriate” for it to “determine the methodology”. According to Ofgem, “there is clearly need for further industry debate and discussion before [Ofgem] can make a decision on a common IDNO charging methodology”.

• “[Ofgem's] decision is for common tariff structures from 2010” (subject to potential derogations) but “the details of tariff structures is to be developed by DNOs”.

• Modification and governance arrangements are referred to in the proposed licence conditions but are not specified. Ofgem expects distribution companies to work together to develop theses arrangements, and put forward a document for approval by 1 September 2009. And proposals from Ofgem's review of governance for charging methodologies “may supersede the governance arrangements [whose core features only are] set out in this document”.

Companies have until Wednesday 29 October 2008 to decide whether to accept the licence obligations to implement these proposals. Unless three or more licence holders object (i.e. EDF or any two ownership groups), Ofgem has powers (presumably subject to judicial review) to impose the licence obligations without a Competition Commission inquiry.

Quick comment. The document contains (Appendix 3) some terms of reference for consultants. It seems that Ofgem would like DNOs to procure (and pay for) these services, but the terms of reference envisage most reporting to be to Ofgem. The document also says that Ofgem has “committed to help DNOs develop” some spreadsheets which seem to overlap with those specified in the terms of reference. All very strange. Message to the person in charge of procuring this work: Reckon is interested in making an offer. Contact Franck.

UK Government notice (2 paragraphs) stating that the Government intends, subject to Parliamentary approval, to add something related to the “stability of the UK financial system” to the list of grounds under which ministers can intervene in the merger control process and take the final decision instead of the OFT or Competition Commission. The Government intends to invoke these new provisions in relation to the possible merger of HBOS with Lloyds TSB.

There would still be an independent review of the transaction by the OFT and, if referred, by the Competition Commission, with a published report advising ministers on both competition and public interest aspects.

There is no reason to doubt that the ministerial decision would be subject to judicial review (at the Competition Appeal Tribunal) under section 120 of the Enterprise Act 2002, in the same way as a merger control decision made by the independent competition authorities. The only ministerial decision that has been made under the Enterprise Act 2002's public interest regime for mergers (which the new proposals would extend) is the order for Sky to reduce its shareholding in ITV, and this is currently under appeal at CAT.

The right of appeal ensures that, if the grounds for the eventual ministerial decision are not clear and well reasoned, any aggrieved customers or competitors will be able to overturn the decision, or to force the Government to establish publicly its exact purposes about financial stability and the proportionality of any decision that it might make to allow a lessening of competition in order to meet these purposes.

Comment. There is a big gap between this proposal and the Chancellor's statement (or audio from BBC radio, 5:07-5:20) that the Government “will waive the competition requirements in relation to these two banks”. This discrepancy does not reflect a difference between Government departments: HM Treasury's press notice is consistent with the announcement reported above, not with the Chancellor's words. Franck

UK Government announcement (8 pages, PDF) of a plan to “propose legislation requiring energy suppliers and electricity generators to contribute an estimated additional £910 million” towards a “Home Energy Saving Programme”. This cost estimate relates to the period to March 2011.

According to the Government, these compulsory contributions from energy companies would not amount to a windfall tax.

Energy retailers would be required to fund more home insulation measures under the Carbon Emissions Reduction Target (CERT) programme (formerly known as the energy efficiency commitment), at an estimated additional cost of £560 million. The other £350 million are to be spent on a new “Community Energy Savings Programme” which would be “funded through a new and additional obligation on the energy suppliers and electricity generators”.

Under sections 7 and 8 of The Electricity and Gas (Carbon Emissions Reduction) Order 2008, the basis for allocating the burden of the £560 million between retailers seems to be the average number of customers supplied at 31 December 2007, 31 December 2008 and 31 December 2009 (except for new entrants where different rules apply). The basis for allocating the burden of the £350 million is not disclosed.

There are also some plans for future consultations or reviews on surcharges for non-direct-debit payments or pre-payment metering.

The possibility of charging electricity generators for more of the carbon emission permits issues within the current phase (2008-2012) of the EU emissions trading scheme was rejected on the grounds that it was not explicitly permitted in the relevant EU directive.

Comment. Assuming effective competition in retail supply, at least some of the £910 million is likely to be passed through to customers through bills, since the extent of each supplier's overall obligation under CERT will depend on its future market share. In other words, the additional compulsory contributions announced today make it more costly for retails to retain energy customers, and this additional marginal cost on retailers will presumably be reflected in their prices. Given the reliance on customer numbers rather than amounts of energy supplied as the basis for allocating the obligation, the burden of the scheme may be as great on low-consumption households as on high-consumption households. For the Community Energy Savings Programme, the charging base for the new obligation or tax is not disclosed, making it impossible to judge how much of the cost is likely to be passed through to consumers. Franck

Ofgem decision (15 pages, PDF) to prohibit SP Energy Networks' G3 proposals for a new method for determining use of system charges on the SP Distribution electricity distribution network. A similar decision (14 pages and 1 blur, PDF) was issued in respect of SP Manweb.

Ofgem considered that it had powers to prohibit on the grounds that some aspects of the proposals were worse than the current arrangements. Specifically, it states that:

We do not consider it appropriate to approve a methodology which includes a generation model which produces counter-intuitive results. We also consider some of the input data to the model to be too subjective to produce cost reflective charges.

The first point is a reference to SP Energy Networks' proposal to use a test-size generator and probability as a way of calculating the expected level of investment required to accommodate lumpy and unknown future generation. Whilst Ofgem abandons the calculations in its consultation paper on this point, it states that it re-ran the analysis with more realistic assumptions and still considered the results to be counter-intuitive. The new analysis is not disclosed in the decision.

The second point is a reference to SP Energy Networks' proposal to use unit cost data reported to Ofgem (instead of internal management projections) as the basis for costings in the HV model.

On the basis of these alleged adverse effects of the proposal, Ofgem apparently concluded that the proposal would not better achieve the relevant objectives, and that it could take account of its wider regulatory duties in reaching a decision. One factor in support of prohibition appears to have been the prospect of implementation in 2010 of an Ofgem-mandated method, and a desire to avoid frequent changes of approach.

Despite this prohibition and the prohibition of SP Energy Networks' IDNO proposals, SP Energy Networks' combined IDNO/G3 proposal is still apparently under consideration and due to be consulted on (according to the last paragraph of the document, page 15).

Comment. I commented on Ofgem's seemingly defective intuition on the test size generator point at paragraphs 84-89 of Reckon's consultation response (22 pages, PDF). Ofgem maintains its reliance on a "counter-intuitive results" claim in the decision. I still fail to understand what Ofgem's reasoning is, or even why the results obtained by Ofgem should cause any surprise at all. And I cannot check the reasonableness of Ofgem's calculations and supposedly corrected assumptions since they are not disclosed. Franck.

OFT grounds (96 pages, PDF) for clearing the merger of Global Radio and GCap Media subject to divestments in the Midlands.

In London, the merger brings under common ownership the Heart, Galaxy, LBC, Capital Radio and Classic FM stations. In the OFT's view, the merger combines essentially complementary businesses in terms of the demographics that they offer to advertisers, and:

30 ... there is compelling evidence that Global will have the profit incentive to bundle together former GCap and Global stations at a lower package price than the equivalent mix-and-match bundled price pre-merger, when the stations were not commonly-owned.

31. Global will reposition its now commonly-owned stations to attract listeners ... and increase the demographic focus of the respective station audiences. While directly benefiting end-consumers — who are at no risk of price effects — advertisers also benefit: ...

On the basis of these “rivalry-enhancing efficiencies”, the OFT decided that there would be no substantial lessening of competition in London.

Comment: Is this the longest ever OFT merger decision? Yet at first glance I cannot see much analysis of the potential lessening of competition in developing programming and attracting audiences — the OFT seems to have relied on a belief that any such lessening of competition would be detected by considering competition for advertisers. Franck

Competition Commission consultation (several PDF files, including a 290-page main report and a 10-page notice of possible remedies) on its inquiry into BAA's ownership of airports.

The proposals include requiring BAA to sell two London airports and one Scottish airport.

On regulation, possible recommendations to the Government include changing the law to introducing a licensing system, enabling conditions such as financial adequacy and ring-fencing to be imposed and enforced by the CAA. The possibility of a special administration regime similar to those in place for water, rail and energy networks is mentioned (but little is said about it).

There is a recommendation to extend CAA's competition law enforcement role to airports. Specific competition law issues e.g. relating to taxi, bus, car hire and parking are not addressed:

8.7. These concerns arise irrespective of common ownership ... They are not in our view appropriately addressed under the terms of this inquiry.

Responses by Wednesday 17 September 2008.

Comment. BAA's recent refinancing appears predicated on continued common ownership of its three London airports, and of Edinburgh and Glasgow airports. There could be substantial costs involved in unwinding covenants in connection with the divestment or financial ring-fencing of individual airports. If so, would these costs be taken into account by the Competition Commission when deciding whether to require divestment or recommend ring-fencing? If it was a merger inquiry, the answer would be no — divestment costs attributable to integration before a merger clearance are disregarded according to paragraph 4.10 of the guidelines. But the Competition Commission's guidelines on market investigations do not address the corresponding issue when a remedy is made more expensive by actions taken a few days before the notice of possible remedies. Franck

Programme (about 3 pages) of a VIBevents conference on generic pharmaceuticals to be held on Tuesday 14 October 2008 and Wednesday 15 October 2008 in Prague. Franck Latrémolière will be speaking before lunch on the first day about the European Commission's competition law investigation in the sector.

September 2008: this conference has been cancelled by VIBevents.

Ofgem consultation (55 pages, PDF) on proposals (228 pages, 16M PDF) to amend the Connection and Use of System Code (CUSC) for the transmission networks in Great Britain so that “renewable and low carbon generation” would be allowed to connect before the network investment necessary to accommodate it was complete. One version of the proposal would also have given renewable generation a continuing priority over other network users for the use of congested network resources.

Ofgem proposes to reject all versions of this proposal. Its main reason is that the carbon benefits of the proposal for earlier connections, whether valued at the Government's shadow price of carbon or at the EU ETS market price, would be lower than the additional costs of allowing new connections to operate without the necessary network reinforcement (these are the costs to National Grid, and eventually to consumers, of compensating both renewable generation and other network users for network congestion affecting their businesses).

An alternative ground for rejection is sketched but not fully developed in the document. Ofgem highlights the discrimination against non-low-carbon generation that the proposals entail, and suggests that it might be disproportionate to the carbon-saving objective because of

5.5 ... the possibility of better ways that may be capable of achieving the same aim of providing faster access to renewable generation yet would not discriminate unduly between classes of generator or incur the substantial cost increases that ultimately customers will be expected to pay.

The possibility in question is claimed to arise from Ofgem's transmission access review work (61 pages, PDF).

Responses by Thursday 28 August 2008.

Comment: Ofgem correctly treats the additional subsidies that additional/earlier renewable generation will receive through the renewables obligation as something to be netted off the shadow value of carbon abatement and the fuel cost savings in non-renewable plants (the latter is analysed as a wholesale electricity price effect). Its finding that the net costs are not justified by the carbon emission reduction might therefore be thought to reflect its finding (see e.g. this September 2007 paper) that the renewables obligation is an unduly costly way of subsidising carbon abatement. But examination of table 3 (after paragraph 3.46) shows that this is not the case: in Ofgem's analysis, the costs would still outweigh the benefits in all scenarios even if all renewables obligation payments were cut by a factor of 20. Franck

OFT notice (about 2 pages) that it has decided to abandon an investigation into allegations that Procter & Gamble has used unfair practices to protect its anti-inflammatory colitis drug Asacol against competition from generics.

On allegations of predatory pricing in the hospital sector (seemingly similar to the case against Napp), the OFT, after investigating for about 30 months, found no evidence of “pricing below the appropriate measure of cost”. The notice does not say what measure of cost was used.

On brand equalisation and unfair marketing tactics, OFT decided not to look. It was apparently too busy, and it was enough to note that “it is possible that the outcome of the current renegotiation of the Pharmaceutical Price Regulation Scheme will make brand equalisation deals less attractive to the UK pharmaceutical industry in the future” and that some gastroenterologists thought that Asacol was different from other forms of mesalazine because it is a modified-release drug.

According to the British National Formulary, the products most directly at stake (400mg mesalazine tablets) are available in the UK from Sandoz (Novartis) and Teva (formerly IVAX) as well as Procter & Gamble Pharmaceuticals. Dr Falk, Ferring and Shire make other formulations.

Comment: This "we can't be bothered to look at your problem" decision looks carefully crafted to be difficult to appeal in the light of the Cityhook case — compare with the pre-Cityhook clozapine case closure (3 pages, PDF). The notice even highlights how some of the conduct complained of might very well be an abuse, but the OFT has deliberately decided not to examine it. Welcome to the UK competition law enforcement regime. Franck.

Ofgem consultation (23 pages, PDF) on a proposal to allow Scottish & Southern Energy to recover £2.1 million from its customers as its 2006/2007 costs of participation in the Beauly-Denny public inquiry.

This is only a first installment: the "bulk of the costs" will be claimed for 2007/2008.

Most responses to a previous consultation had objected to such customer funding for the promoter of the scheme. The scheme itself is opposed by campaign groups, primarily because of its visual impact.

The document explains that costs of participation in the inquiry are included in the definition of relevant costs in the transmission investment for renewable generation (TIRG) licence condition that it had agreed with the company in 2005. Ofgem does not therefore need to express a view as to whether this participation is necessary or desirable in a broader sense.

Responses by Wednesday 9 July 2008.

Comment. I cannot find the responses to the 2007 consultation on Ofgem's website, so I do not know whether any of the anti-pylon campaigners have complained that objections customer-funded participation of the promoter in the public inquiry were now being met by the specific language in a licence condition (which they might not feel they had a proper opportunity to object to). Franck

Appeal court judgment (16 pages in French, PDF) reversing the Conseil de la concurrence decision that the pharmaceutical company GSK had committed predatory abuse through below-cost pricing of Zinnat (an antibiotic for surgery-induced infections).

The court endorses the Conseil's analysis of costs, including that GSK was not entitled to claim that the high transfer prices paid by its French business to its Swiss business (presumably for tax reasons) were irrelevant to the Akzo cost test.

The basis for the court's reversal of the finding of abuse is that the Conseil had not satisfactorily proved its assertion that below-cost pricing of one drug was part of a GSK strategy to establish a reputation for aggressivity so as to deter future competition in other markets. In reaching this view, the court relies on:

• The fact that other elements (e.g. threats to competitors, an intention to exclude) were present in the Akzo case and nothing similar is alleged here.
• Evidence from GSK that it had faced successful competitors in other markets, against the claim of a reputation for aggressive behaviour.

The matter may be appealed to the French supreme court (Cour de cassation).

Comment, 22 April 2008: The Conseil's cost analysis, which survives the appeal court ruling, concluded that prices were below variable costs. The ECJ said at paragraph 71 of Akzo that “prices below average variable costs .... by means of which a dominant undertaking seeks to eliminate a competitor must be regarded as abusive”. I wonder whether the GSK case could have been decided on the basis of that first leg of the Akzo test: condemning the below-cost pricing behaviour simply because its object was to eliminate a competitor. But instead of that, the Conseil decided to launch into a general discussion (paragraphs 256-281 of the decision) on economic theories of predation and the alleged effects of GSK's strategy, drawing parallels with the strategy condemned in the Akzo case. That speculative section of the decision provided ample ammunition for GSK in this appeal. Franck

Ofgem announcement (1 page, PDF) that it will investigate allegations that Scottish electricity generators have abused a dominant position. According to this article in The Times, the allegations relate to high balancing mechanism payments to generators at a time where there was a shortage of power in Scotland due to scheduled plant outages (combined with the physical limitations of transmission capacity between England and Scotland).

Speculation, 17 April 2008: Ofgem's announcement is limited to allegations of “abuse of a dominant position in the electricity generation sector”. There is no allegation that ScottishPower and Scottish & Southern have in any way exchanged information to co-ordinate their prices or the outages that might have led to the supply shortage, or that their ownership of transmission networks has any relevance. Instead it seems that Ofgem wants to investigate the outage decisions that each company made individually, and the pricing strategies that each generator adopted once the unusual situation of a supply shortage had arisen.

For this to be characterised as an abuse of a dominant position, it seems to me that Ofgem would need to establish:

• that there was a relevant market limited to Scotland at the time (debunking any claim that establishing a single set of GB-wide trading arrangements through BETTA had led to a single market in economic terms);
• that ScottishPower and Scottish & Southern held a dominant position in such a market (presumably collectively, in the absence of relevant transmission constraints within Scotland); and
• that the prices offered were excessive or the withdrawal of supply through outages were unjustified, probably in an exploitative abuse sense.

This interpretation would be consistent with Ofgem's previous comments on the relevance of exploitative abuse to allegations of overcharging in the balancing mechanism. Franck

My article of a few days ago on the CAA's approach to the cost of equity included a conclusion that the CAA's error was not of great financial significance, because I thought that the CAA probably did not really need a reason to follow the Competition Commission's recommendations on return of capital, so that its reliance on a bad reason was probably not that important.

I am grateful to a reader of the original article (someone unrelated to BAA, CAA, the Competition Commission, airlines or any of their advisers) for pointing me to the evidence underpinning the Competition Commission's cost of capital estimates. I have not had time to chase every detail, but it is clear that my original beliefs about the Competition Commission's processes were misplaced. My previous view that it would be nearly impossible for BAA to challenge the CAA's reliance on the Competition Commission's recommendations was not right, and I have amended the article accordingly.

Article on the reasons put forward by the CAA in its decision on Heathrow and Gatwick price controls to dismiss an argument by BAA that the cost of capital had wrongly been estimated on the basis of a geometric mean rather than an arithmetic mean.

The CAA's reasoning turns out to be invalidated by a fairly simple error. This is something of a surprise and a disappointment, especially as the CAA was one of the clients for the 2003 Smithers & Co study which, I thought, had clarified these issues.

I have not had the time to write substantial articles in the past six months.

Instead my commentary has taken the form of occasional paragraphs on particular documents or news items. I try to keep comment clearly labelled as such and separated from fact, like a good journalist.

Articles containing some of my commentary are now included in the "viewpoint: Franck" feed . For my long articles only, use the Franck articles archive feed .

No existing URLs have been broken as a result of these adjustments.

Report (175 pages, PDF, including evidence and transcripts) of the transport committee of the lower house of the UK parliament from an inquiry into BAA plc.

The report endorses a break-up of BAA, seemingly asserting that the London airports if under separate ownership would be subject to effective competition and would not need to be price-controlled. It also recommends removing the automatic reference to the Competition Commission as part of any price control review process that remains.

According to the report (in response to easyJet's complaints about excessive charges allowed by CAA, and claims that each of Heathrow, Gatwick and Stansted on its own would still be a monopoly):

83. We agree that breaking up BAA's monopoly would not remove the need for effective regulation. What it would remove though — through the removal of substantial market power — would be the need for the kind of economic regulation in the form of price controls.

Much of the report was only agreed by a majority of the committee that included the chairman Gwyneth Dunwoody MP (Lab), with the minority apparently led by David Wilshire MP (Con). Statements that were only retained in the report after a majority vote include at paragraph 47:

The comparison of the regulation of BAA to an antitrust regime lends further weight to our view that BAA’s market position is fundamentally anti-competitive.

(The comparison referred to is a remark by the Competition Commission that large financial incentives for quality of service might be explained by analogy with the large fines considered necessary for competition law infringements.)

Comment. Loud-mouthed claims, but not a lot to back them up. Some of the report is just stuff and nonsense — e.g. the "fundamentally anti-competitive" claim quoted above. And look at the wild claim at paragraph 80 that “Any airport that were sold off [as part of a BAA break-up] would not be price-controlled, as it would [sic] be in a position of market power, and thus would be free to compete on price.” Leaving aside the typo (missing "not" in the sentence about market power), do they really mean any airport? Not much is left of the credibility of the report after that sort of statement. Franck

Ofgem notice (3 pages, PDF) that it will not make a decision on P211 (ex post unconstrained stack) until it is able to compare it with P217 (real-time tagging).

The BSC Panel came out against P211. Ofgem ran its own consultation in December 2007.

Comment 1: The letter states that “It is very disappointing that P217 was not raised much earlier” and “we urge the industry to prioritise progressing the assessment of P217 so that resolution of the identified defects can be implemented as early as possible”. This might as a simple comment about timing; but it might also be read as an indication that Ofgem thinks that the correct answer lies in the direction of P217. Franck

Comment 2: Ofgem also seems to endorse more commercial freedom for National Grid in the P212 decision: this refers to “the solution that works effectively in the gas market” in which “the [system operator] can also trade in the gas on-the-day commodity market”. This tends to reinforce the impression that P217 might be in favour. Franck

National Grid announcement that it intends to appeal Ofgem's decision that metering contracts made with gas suppliers by its Transco unit in 2004 infringed competition law.

The decision does not seem to be on Ofgem's or OFT's website yet.

Update, later on 25 February 2008: Ofgem has released a summary (3 pages, PDF) of the decision and said that “the full decision document will be published ahead of the Easter break [i.e. 20 March 2008] once commercially confidential information has been removed”.

Update, 19 March 2008: decision document.

Comment 1: I know it is only a stock market notice, but National Grid's arguments do not really seem to address allegations of competition law infringement. It draws attention to the fact that suppliers were not coerced into the contracts — without addressing the likely claim that National Grid's market position made such coercion automatic and invisible. It denies intention to break the law, but does not deny any intention to tie customers, or negligence. I will not be surprised if the focus of the appeal is on the fine and perhaps on the OFT penalty guidelines: £41.6 million does seem quite big, although presumably it was calculated correctly in accordance with the guidelines. Franck

Comment 2: There is an Ofgem press notice (2 pages, PDF) which states that the decision was for abuse of dominant position and makes no allegation of breach of the Article 81 or the equivalent UK prohibition (which only came into force on 1 May 2005). Given National Grid's keenness to claim that the contracts “remain in full effect”, there might well be a threat of litigation from the suppliers in question. See Can a contract be void under Article 82? | viewpoint: Franck for a case with some similarities. Franck

Office of Rail Regulation paper (15 pages, PDF) on its approach to analysing allegations of excessive pricing under the Competition Act 1998 or Article 82. This complements the plain English guide on complaints about rail fares and car park charges.

Comment. The paper rests in significant part on the assertion that:

22 ... high prices could not be illegal when the [train operating company] had competed away any supernormal profit by means of high premium/low subsidy payments at franchise let.

According to paragraph 13, this is consistent with the United Brands characterisation of exploitative abuse as behaviour to “reap trading benefits which it would not have reaped if there had been normal and sufficiently effective competition”. ORR appears to take the view that, whatever price is charged, if the money is passed on to Government then this guarantees that there has been no "reaping" by the train company in the United Brands sense. I am not so sure. Would this argument work for any commercial franchise operator passing on its abusive profits to its franchisor, or is it dependent on the fact that the franchisor is the Government? Franck

Ofwat consultation (28 pages, PDF) on a proposed revision to its 2000 Competition Act 1998 guidance. Responses by Wednesday 12 March 2008 or Thursday 13 March 2008.

Franck's comment. This focuses on procedures, cross-references to other guidance and generalities. But the following propositions might be of interest to those involved in competition disputes in the water sector:

4.33 The [water supply licensing] regime contains a dispute handling process. As a result, most complaints about anti-competitive behaviour relating to combined supply and retail competition will be dealt with under this specifically designed regime rather than the [Competition Act 1998]. However, there are some issues not covered specifically in the [Water Act 2003] and the relevant regulations and guidance. In those circumstances, Ofwat would apply the [Competition Act 1998] if it was appropriate to do so.

4.35 Insets are provided for in the [Water Industry Act 1991]. Ofwat publishes guidance on how to apply for an inset appointment application. As a result, Ofwat will usually seek to resolve disputes about insets using its specific powers under the [Water Industry Act 1991] and the information in its guidance. Nevertheless, there might be occasions when Ofwat will find it appropriate to apply the [Competition Act 1998] to such complaints about inset-related issues.