CMA clears Severn Trent / Dee Valley merger

The Competition and Markets Authority (CMA) published today their decision to clear the acquisition of Dee Valley Water by Severn Trent Water. Dee Valley is a water only company operating mainly in Wales and parts of England while Severn Trent is a water and sewerage company operating mainly in England and parts of Wales. The CMA found that the Merger would not prejudice the ability of the Water Services Regulation Authority’s (Ofwat) to make comparisons between water companies. In addition, it considered that the Merger would not result in significant negative impact for customers.

The Merger is the first one to be assessed under the Water Act 2014 and the first one to be cleared in Phase 1. Under the new regime, the CMA must request and consider Ofwat’s opinion on the impact on their ability to make comparisons between water enterprises in carrying out its functions. Ofwat uses comparisons to perform a number of functions, including during its periodic price reviews for setting price limits and service quality requirements, and between price reviews for monitoring and enforcement and spreading best practice.

The CMA found that Ofwat’s views were aligned with those of Severn Trent in concluding that any adverse impact of the Merger on the benchmark or the level of precision are not sufficient to amount to prejudice.

Frontier Economics supported Severn Trent in performing quantitative and qualitative analysis on the potential impact of the Merger.

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