Part 2: Approach to the regulation of Developer Services at Price Review (PR24)

Developer Services Work - Part 2: Approach to the regulation of Developer Services at Price Review (PR24)

This work will help inform our thinking on the price control framework for PR24 and beyond, including simplification and scope of the price review. It will explore how we can use a better mix of markets and regulation in developer services in the future, in order to achieve better outcomes for developers and non-developer customers.

Overall Ofwat would like to understand the options and recommendations for the longer term regulatory framework for developer services. In particular, Ofwat wants to understand whether customers would be better served by developer services remaining in the price control, or by reducing the regulation for the contestable elements, and potentially removing them from revenue controls.

Requirements

 Identify potential options for maintaining or reducing the regulation of contestable elements of developer services. This should include considering

o the current 'single till' revenue controls

o moving to 'dual till' or separate price controls

o the removal of formal controls and a greater reliance on charging rules.

 Highlight how these regulatory changes could be achieved over time, in particular to maximise the potential benefits from facilitating competition. For example, considering how the removal of revenue control regulation from contestable developer services might affect the consequential structure and shape of the relevant price controls and regulatory incentive framework.

 Consider how, if developer services where retained within the price control framework, this could be supported by changes to the cost assessment methodology or other aspects of our approach to price reviews.

 Consider whether adoption of any of the proposed options should be accompanied by changes elsewhere to the regulatory framework (such as our Charging Rules).

 Prepare an assessment framework under which the options can be considered, including appropriate decision-making criteria.

 Highlight potential costs and benefits of each of the options. This should include

o the impact on facilitating competition;

o the impact on developers and non-developer customers, including the extent to which the options would promote or inhibit the developer services market;

o the benefits of simplifying price controls;

o consideration of additional risks posed by reducing regulation and what risk mitigations might be needed; and

o how the options for reform are affected by the interaction between contestable and non-contestable markets of the developer services market.

In developing options and recommendations, the Supplier should consider:

 regulatory frameworks for developer services in other sectors

 how greater competition has been introduced in developer services and other services in other sectors