Access and competition in the water industry

Abstract

Access regimes, coupled with entry in the contestable sectors of the relevant industries, have facilitated substantial competition in the electricity and gas industries in many countries, but water has yet to benefit from such competition. In the UK, access codes in the water industry have been in place since September 2000, and a bill is currently before the UK Parliament to open the retailing and abstraction sectors of the water industry to competition. Will the UK, and other countries which subsequently follow it in reform, be likely to see substantial increases in competition in the water industry as a result of these reforms? This paper argues that it will not, as water is an economically different product to electricity and gas, with few of the attributes inherent in electricity and gas which have attracted entry to the competitive sectors of these industries. Moreover, potential environmental externalities associated with access regimes in water, but not in electricity and gas, suggest caution before establishing comprehensive access regimes in water.