Wholesale Retail Code Change Proposal – Ref CPW080
| Date | 14 December 2021 |
1
Wholesale Retail Code Change Proposal – Ref CPW080
Modification
proposal
Wholesale Retail Code (“WRC”) Change Proposal – CPW080 –
Simplification of the default and termination process
Decision
The Authority1 has decided to reject this Change Proposal.
Publication date
14 December 2021
Implementation
date
N/A
Background
Section 10 of the Business Terms of the Wholesale Retail code ('WRC') sets out the
circumstances under which a Retailer will be classed as a Defaulting Trading Party. A
Retailer will automatically be classed as a Defaulting Trading Party, for example, in the
event that it makes a late payment which is not remedied within the specified
timeframes, where its licence is revoked or where it is subject to an Insolvency Event.
The Contracting Retailer must be classed as a Defaulting Trading Party under section 10
of the Business Terms before the Contracting Wholesaler is able to consider pursuing
the termination of its Wholesale Contract. The provisions relating to termination of a
Wholesale Contract are set out in section 11 of the Business Terms. Prior to the
1
Unless otherwise specified, the terms used in this document are those defined in the WRC
We are rejecting this Change Proposal.
On the basis of evidence provided, we cannot reasonably conclude that the Change
Proposal will achieve its objective of simplifying the default and termination provisions
of the Business Terms. It is also not clear from the information provided that the
impacts of this Change Proposal for customers have been sufficiently explored.
Additionally, in some instances the proposed amendments, which are not considered
to be minor amendments, have not been consulted on.
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termination of the Wholesale Contract by the Contracting Wholesaler, sections 10 and
11 of the Business Terms require that formal notices are served. Section 20 of the
Business Terms sets out the service requirements for these notices.
As part of Ofwat’s review of credit arrangements in the business retail market, Trading
Parties indicated that the provisions relating to termination of a Wholesale Contract
were not clear and that the required notifications do not follow a linear process
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.
Trading Parties suggested that there could be an interim step introduced into the
current process which would take place ahead of classifying a Retailer as a Defaulting
Trading Party.
The Credit Committee (“the Committee”) was tasked by the Panel to develop this
Change Proposal which seeks to clarify the process by which a Retailer will be classed
as a Defaulting Trading Party and the provisions relating to the termination of a
Wholesale Contract. The Committee has subsequently reviewed the relevant provisions
of the Business Terms and has proposed changes, which are set out below.
The issue and the Change Proposal
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Default provisions
Section 9.7.2
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- Clarification of ‘disputed or questioned’ and the permissibility of
withholding amounts relating to Disputed credit items
Section 9.7.2 currently provides that:
“If any item or part of an item in an invoice or statement rendered by a Party under this
Section 9 is disputed or subject to question, payment of the remainder of the invoice or
statement shall not be withheld on those grounds, and the provisions of Section 9.9.2
shall apply to the disputed or questioned item from the time, and to the extent that, it
shall subsequently be agreed or determined to have been properly payable. Where a
Party wishes to dispute or question an item or part of an item in an invoice or
statement, it may only do so in good faith and on grounds which are not vexatious or
frivolous”.
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See KPMG’s report which sets out Ofwat’s review of credit arrangements in the Non-Household Retail
market
3
The proposal and accompanying documentation is available on the MOSL website at
https://www.mosl.co.uk/market-codes/change#scroll-track-a-change
4
Unless otherwise specified, references to section in this document relate to sections of the Business
Terms.
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