CMA to hear Castle appeal against Ofwat credit ruling on fragile wholesalers

The Competition and Markets Authority (CMA) has granted Castle Water permission to appeal a decision by Ofwat on credit in the non-household retail market, and will make a ruling on the case by 2 May.

Ofwat had until 19 March to reply to the appeal, and the deadline for applications to intervene is 26 March.

The case panel is chaired by Richard Feasey, and comprises Frances McLeman and Crispin Wright. 

The appeal concerns a code change proposed by Castle but rejected by Ofwat, which sought to temporarily stand down the requirement for credit security to be provided by a retailer to a wholesaler if the wholesaler’s balance sheet falls below the credit rating required by Ofwat in the wholesaler’s licence. Castle argued that potentially the credit posted could be vulnerable to being drawn upon beyond the sums due from the retailer to the wholesaler, and potentially, that banks issuing letters of credit for retailers may refuse to do this (or charge a premium for higher risk) if the recipient wholesaler is a failure risk.