Castle Water v Ofwat

Castle Water proposed an amendment to the WRC to remove the obligation on retailers to provide credit support to a wholesaler that does not meet Ofwat’s revised cash lock up triggers (i.e. when a Wholesaler’s lowest credit rating is BBB/Baa2 with negative outlook or designation, or lower). Ofwat declined to amend the WRC and rejected Castle Water’s proposal. Castle Water alleged that Ofwat failed properly to have regard to, and/or failed to give the appropriate weight to, the objective to protect the interests of consumers, wherever appropriate by promoting effective competition and Ofwat was wrong in its findings about the response of financial institutions to Wholesaler distress.

At permission stage, Ofwat contended that the CMA did not have jurisdiction to consider the appeal because the proposal had not been subject to consultation “under the [Water Industry Act]” as required by s.207A for a refusal of a proposal to be appealable. In a permission decision dated 12 March 2025, the CMA rejected that contention; it concluded that Ofwat had consulted in the exercise of its general and supplementary statutory powers, and thereby had carried out a consultation “under the Act”.

At the substantive stage, the CMA rejected Castle Water’s appeal. The CMA found that Ofwat did have regard to, and gave appropriate weight to, the consumer protection objective. It also held that Ofwat’s finding that there was insufficient evidence to conclude that a Wholesaler's financial position (or a perception of the Wholesaler's financial position) has a direct impact on a Retailer's availability, and cost, of financing was not wrong as a matter of fact or law; errors identified in Ofwat’s decision were accordingly held not to be material.

Ivan Hare KC and Femi Adekoya represented Ofwat.

Monica Carss-Frisk KC and Daniel Cashman represented Castle Water.

The Permission Decision is available here. The Determination is available here.