What happens to your water account if your retailer goes bust

Find out what happens to your account if your water supplier goes bust

The English non-household water market has had to catch only one falling retailer (Tor Water, February 2020). Ofwat is now rebuilding the safety net before the next one, with a new Cost Recovery Mechanism and Cashflow Support Tool consultation that closed in March 2026, and a refreshed Retail Exit Code coming into force in April 2027. Here is what changes for a B2B buyer, and what to do about it now.

The Tor Water Precedent

On 19 February 2020, Ofwat revoked Tor Water's licence at 6pm. The retailer had been collecting money from customers but failing to pass the wholesale portion on to South West Water, which eventually terminated the supply contract. Within 48 hours, the Market Operator (MOSL) had run the Interim Supplier Allocation Process: Tor's customers were divided up between other licensed retailers, and each customer received a letter naming their new retailer and account reference. Customer access to water was not disrupted at any point during the transfer.[^1]

This is the safety net that every business water buyer is relying on, often without realising it. The catch is that it worked in 2020 because Tor was small enough for several retailers to each take a slice voluntarily. Nothing in the Interim Supply Arrangement actually requires a retailer to step forward. If a larger retailer fails and volunteers either decline or cannot take on the book without straining their balance sheet, the regulator has a problem.

Interim Supply Arrangement (ISA)definition

This is the regulated safety net for the English business water market. If a retailer can no longer serve its customers, Ofwat asks MOSL, the body that runs the market, to move those customers across to other licensed retailers. While that happens, customers are placed on interim terms and the price they pay is capped by the Retail Exit Code.

Where the money actually sits

The financial exposure is not the future bill, it is the cash on deposit today.

A credit balance with a business water retailer is an unsecured claim against a regulated counterparty. It earns no interest, carries no ring-fence, and in a disorderly exit converts into a queue position in the administrator's estate.[^2] The Customer Protection Code of Practice requires retailers to disclose credit balances on at least a quarterly basis and to refund on request, but there is no Supplier Protection Fund equivalent to the energy market.

Most buyers' policies do not yet cover utility retailers because the regime is new. That is fixable in one quarterly board review. The same treasury policy that caps your exposure to any one bank should apply to retailers, too.

What Ofwat is changing in 2026

The ISA is being put on a stronger footing in two ways.

On 27 January 2026 Ofwat published a consultation on a Cost Recovery Mechanism and a Cashflow Support Tool. The first reimburses a retailer that absorbs a failed book; the second bridges working capital while the new customers start paying. Consultation closed on 4 March 2026; the final decision is expected this spring.[^3]

MOSL's public response called the proposals 'an important step' while pressing for alignment with the January 2026 Water White Paper, which proposes a statutory supplier-of-last-resort obligation on the model of the energy market.[^4] That legislation has not yet been introduced.

The Retail Exit Code (REC) is the parallel reform. It sets price caps and other protections for 'deemed contract' customers, that is, those who have not actively signed a new contract since the market opened in April 2017 (most of the 1.2 million eligible English businesses, especially SMEs and lower mid-market). Ofwat's REC26 review closed for consultation on 8 September 2025, with reform proposals due this spring or summer and new caps in force from April 2027.[^5]

Deemed contractdefinition

A contract you have not actively negotiated. Default tariff under a regulated cap. Applies to the bulk of English business sites that have never switched retailer since market opening on 1 April 2017.

The contested zone in the REC review is mid-market consumption. The industry view, set out in submissions to the consultation, is that price-cap protection should lift from a larger slice of medium-sized customers on the grounds that they are sophisticated enough to negotiate; the Consumer Council for Water has pushed back to defend the cap as one of few real consumer protections.[^2] In practice:

• Under 0.5 megalitres a year: almost certain to remain protected whatever Ofwat decides.
• 0.5 to 50 megalitres a year: in the contested zone. Outcome matters; expect new caps to tighten on some bands and lift on others.
• Over 50 megalitres a year: historically a lighter-touch view; expect that to continue.

How to read a retailer's BR-MeX score

Ofwat's third 2026 move is the Market Performance Framework reform, live since 1 April 2025. The old MPS / OPS metrics have been replaced by BR-MeX, the Business Customer and Retailer Measure of Experience, which scores the actual service experienced by business customers and the retailers acting for them. Financial incentives are tied directly to the scores.[^6]

Any retailer competent to handle a business water account in 2026 should be able to quote you their BR-MeX score and quartile ranking without consulting head office. Anything in the bottom quartile, or any refusal to disclose, warrants written explanation in a tender response.

Three actions to take this quarter

The English business water market is going through a major overhaul. It began with Tor Water's collapse in 2020 and won't finish until Ofwat is replaced by the Clean Water Authority in 2027 or 2028. The buyers who come out ahead will be those who treat their water account like any other financial relationship, not as a utility you set up and forget.

Need help reviewing your retailer's credit standing or running a BR-MeX-weighted comparison against peers? Our business water team handles portfolios of every size. Request a free credit and BR-MeX review, and we will get back to you within two working days.

Written by Faith Labong, Staff Writer at Purely Energy. Peer-reviewed for technical accuracy by Mark Hoffman FCA. Sources retrieved 16 May 2026.

FAQs

If my water retailer goes out of business, what happens to my water bill?

Your water keeps flowing either way because the wholesaler runs the network, not the retailer. What changes is who bills you. Ofwat triggers the Interim Supply Arrangement and asks MOSL, the market operator, to move your supply points across to one or more volunteer retailers within 48 hours. You'll get a letter telling you who your new retailer is and your new account reference. Expect a gap of two to six weeks before billing starts up again.

Can I lose money if my water retailer goes out of business?

Yes, you can, on any credit balance you've built up. In September 2025, CCW reported that English business water retailers were holding £242 million of customer money, more than half of it (£127m) on accounts that had already closed. None of that money is legally protected. If your retailer fails, you're treated like any other unpaid supplier, you join the back of the queue when the administrator shares out whatever's left, which is usually not very much.

Who decides which retailer takes over a failed retailer's customers?

MOSL, the Market Operator. Ofwat triggers the Interim Supplier Allocation Process; MOSL distributes the supply points across retailers that have volunteered to receive them, aiming for as equal a split as possible. You can switch the moment the transfer completes if you prefer.

What is the REC and when will it change my bill?

The Retail Exit Code sets price caps and other protections for water customers who have not actively chosen their retailer. Ofwat is reviewing it now; the consultation closed in September 2025 and new caps are expected to take effect in April 2027. If your annual consumption sits between 0.5 and 50 megalitres, the outcome matters to you.

How do I tell if my business has a water leak?

Turn off every water-using fixture, read the meter, wait 30 to 60 minutes, read again. Any movement is a leak. Our free water leak checker runs the maths for you.

[^1]: Ofwat, Ofwat stepping in to protect customers of Tor Water Limited, https://www.ofwat.gov.uk/ofwat-stepping-in-to-protect-customers-of-tor-water-limited/, retrieved 2026-05-16.

[^2]: Consumer Council for Water, Delivering Change: Two-Year Progress Report for Business Water Customers, September 2025, https://www.ccw.org.uk/publication/delivering-change-two-year-progress-report-for-business-water-customers/, retrieved 2026-05-16.

[^3]: Ofwat, Strengthening protections for customers in the business retail market: implementing the CRM and CST into the ISA, consultation 27 January to 4 March 2026, https://www.ofwat.gov.uk/consultation/strengthening-protections-for-customers-in-the-business-retail-market-implementing-the-cost-recovery-mechanism-and-cashflow-support-tool-into-the-interim-supply-arrangements/, retrieved 2026-05-16.

[^4]: MOSL, Response to Ofwat's Interim Supply consultation, February 2026, https://mosl.co.uk/documents-publications/10688-mosls-response-to-ofwats-interim-supply-consultation/file, retrieved 2026-05-16.

[^5]: Ofwat, Business retail market 2025-26 review of the Retail Exit Code, https://www.ofwat.gov.uk/regulated-companies/markets/business-retail-market/business-retail-market-2025-26-review-of-the-retail-exit-code/, retrieved 2026-05-16.

[^6]: Ofwat, Business Retail Market Update 2024-25, October 2025, https://www.ofwat.gov.uk/wp-content/uploads/2025/10/BR-market-update-2024_25.pdf, retrieved 2026-05-16.