Derogations guidance

Date17 February 2017
February 2017
Trust in water
About this document
This document sets out guidance for applications to Ofwat by Licensees and
Appointees for derogations from compliance with obligations in the Wholesale Retail
Code (‘WRC’) and/or any WRC subsidiary document. As the WRC can apply both to
Wholesale Contracts between Appointees and Licensees and also to written
arrangements between the wholesale and retail businesses of an integrated
Appointee, i.e. where an Appointee has an Associated Retailer, as defined in the
MAC/ WRC (the latter through the operation of Condition R4 of the Instrument of
Appointment, known as the Stapling Condition), this document also includes the
process for Appointees seeking changes to the derogations from the Stapling
Condition set out in Schedule 8 to the MAC.
This guidance applies to all Licensees and Appointees in England and Wales.
A derogation is a direction from Ofwat which relieves a licensee or appointee from
compliance with certain of its obligations to comply with the WRC either as a result of
it entering into Wholesale Contracts or as a result of the operation of the Stapling
Condition. The power to grant derogations from compliance with these specific
obligations will be introduced when the WRC is issued by the Authority. The
possibility of derogations as a result of the operation of the Stapling Condition
already exists in that condition and the provisions of Schedule 8 to the MAC.
Unless a derogation from compliance with a specific obligation in the WRC is
granted by Ofwat, all Licensees and Appointees are expected to comply with all
relevant obligations in the WRC. Derogations will not be granted retrospectively and
Ofwat will still consider whether enforcement action for non-compliance is
appropriate in the circumstances in accordance with our approach to enforcement.
This Derogations Guidance document includes:
our approach to derogations;
the process for requesting a derogation from the WRC;
the criteria for requesting a derogation;
the assessment process for derogations;
the proposed way in which the outcome of a derogations process will be
implemented; and
additional information and appendices that may be useful to applicants.

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