OFT Study into Organic Waste Seeks Increased Competition

22 September 2011

Following a recent market study, the UK's Office of Fair Trading (OFT) has made recommendations intended to promote increased competition and efficiency in the treatment of organic waste.

The market study into the treatment of organic waste in England and Wales examines whether the market for treatment, recycling and disposal of sewage sludge and organic waste is working effectively to deliver the best outcomes for customers.

In the study the OFT identifies a number of barriers to competition related to aspects of economic, environmental and planning regulation, and to the apparent corporate culture of some water and sewerage companies.

The OFT said that the market study followed made to it from Ofwat - the UK's Water Services Regulation Authority). OFT also points out that it has worked closely with Ofwat throughout the study.

Recommendations

The report makes a range of recommendations aimed at promoting competition, hence driving efficiency and innovation in the sector.

At the heart of the recommendations are proposed changes to the economic regulation of water and sewerage companies to foster efficiency and help create a level playing field between them and other suppliers of organic waste treatment.

In addition, the OFT considers that planning policy proposals currently under consideration could contribute to greater competition.

The report makes a range of recommendations aimed at promoting competition that the OFT claimed will help to drive efficiency and innovation in the sector, including greater harmonisation of the environmental regimes applicable to sewage sludge and other organic waste.

The recommendations also propose changes to the economic regulation of water and sewerage companies to foster efficiency and help create a level playing field between them and other suppliers of organic waste treatment.

Furthermore, the study also recommends greater harmonisation of the environmental regimes applicable to sewage sludge and other organic waste. In addition, the OFT considers that planning proposals currently under consideration could contribute to greater competition.

The OFT said that it has provisionally decided that a market investigation reference to the Competition Commission would not be appropriate at this time, as it considers that the findings of the study can be better addressed by Ofwat and other government departments acting on the recommendations in the study.

Sonya Branch, OFT senior director of the services, infrastructure and public markets group said: "Our market study, conducted with Ofwat's support, identifies that there is greater scope for competition in the treatment of organic waste, however the current economic regulation, environmental protection and planning regimes are barriers to this competition developing."

"We have therefore today made a number of recommendations to Ofwat and other government bodies that have the potential to tackle these barriers to competition, benefit consumers and drive efficiency and innovation in organic waste treatment."

Reaction

Reacting to the findings, Keith Mason, director of finance and networks for Ofwat said: "We are pleased that this study has seen widespread engagement from across the sectors and we welcome OFT's clear recommendations to Ofwat and others. The study will help inform our understanding of how we remove potential barriers and distortions to competition, and how we regulate sewage sludge in the water and sewerage sector."

Ofwat said that it will now consider the recommendations over the coming weeks and will discuss how it can best respond to the OFT's recommendations with stakeholders during the autumn and winter.

Meanwhile, the Anaerobic Digestion and Biogas Association (ADBA) Chairman and Lib Dem peer Lord Redesdale has welcomed the publicationof the Market Study.

ADBA said that it has been campaigning for changes which will help deliver the "huge increase" in Anaerobic Digestion (AD) promised by the coalition government, and has welcomed Ofwat's decision to request the study.

"The Study recognises that competition both for sewage sludge as a feedstock for digestion is very limited, that water companies are largely not connected to the wider organic waste treatment market, and that changes have to be make water supply and treatment sustainable," commented Redesdale.

According to ADBA, the OFT's recommendations could help lead to huge rise in investment in AD from the water sector, which could help the industry as a whole, and open up new opportunities for treating sewage sludge.

"Over the coming months, ADBA will present our view that urgent measures need to be taken by Ofwat to increase the AD in the water sector, and will discuss with the regulator how we move to a mature and competitive AD marketplace both inside and outside the water sector," added Redesdale.