What is Making Waves in the Water Market?

By 27 February 2019April 3rd, 2019General

In April 2017 the UK government set up a national program to open a new water retail market for the benefit of businesses, The Open Water Programme. This allowed businesses to consider switching their water provider, providing a much needed competitive edge with the benefit of customers being able to save money. There are three governing bodies involved in this program, namely –The Water Services Regulation Authority; Ofwat, The Department for Environment, Food and Rural Affairs; Defra and The Market Operator Services Ltd; MOSL.

As this industry is still growing, we wanted update you on the progress and status of it so far, providing you with essential highlights you need to know about. As with any new industry there are challenges that need to be overcome as well as accomplishments.

Addressing the last quarter, several retailers have seen a significant increase in their customer database. This means that more and more people have been switching supplier, which is a positive thing and exactly what the government wanted to encourage by opening up the industry- a competitive marketplace. In fact Market Operator Services Limited (MOSL) have stated that ‘Four unassociated retailers accounted for over 55% of switching gains this quarter and smaller retailers (with fewer than 1500 supply points) trebled their gains when comparing this quarter with the last.’

Unfortunately, one of the key trends is cancellation of switches. A challenge which seems to be dominating the industry. Over 10,000 switches were cancelled in this quarter because of either a pre-existing contract still in effect or due to outstanding debt owing to the current supplier.

Processes for invoicing and charging for the live market have been met with several issues by suppliers, each one having to be addressed in its own rights. Adding to the administration and rigmarole of processing payment, further making this new industry a challenge.

Since the Open Water Programme began, there are 25 wholesalers and 43 retailers taking part. Astoundingly 5 business have also been able to self-supply; Coca Cola European Partners, Greene King, Marstons Plc, Whitbread and Blackpool Council. Considering 2 years ago, when the Open Water Programme was not yet underway, people weren’t even switching supplier let alone supplying themselves, making it all the more unexpected.  Additionally, more companies have been granted self-supply licences. This is a move which shows how buoyant the market is, since government legislation de-regulated water supply.

Who’s Who in the Market
(Source: Ofwat)

Customers – There are 1.2 million non-household customers in England eligible to choose their supplier of retail services. There are an additional 130,000 business customers in Scotland.
Retail suppliers – Retail suppliers are able to compete for the custom of all eligible business customers.
Wholesalers – Appointed companies that own and operate the network of pipes, mains and treatment works. They act as the wholesalers in the market, selling water and wastewater services to retail suppliers.
Open Water – Open Water is the name given to the programme set up by UK Government to open the new business retail market. The programme is being led by three partner organisations – Ofwat, Defra and MOSL. Open Water shares information about the market with customers.
Defra – the Department for the Environment, Food and Rural Affairs.
Ofwat is the economic regulator for the sector. We are also the licensing authority for the market. In order to compete in the market, suppliers must be awarded a licence.
MOSL – the Market Operator makes sure the market functions in a simple and efficient way. MOSL facilitates the transfer of customer information when they switch retail supplier.
WICS – The Water Industry Commission for Scotland is responsible for regulation of the competitive market in Scotland.

The Open Water website explains the benefits of self-supply- ‘Each business highlighted will now supply their own water and wastewater services; allowing them to provide their own retail services, such as meter readings. Self-supply can offer significant cost savings and flexibility for businesses with multiple premises or those using large amounts of water.’

Although the majority of the news is promising, data has been collated showing levels of concern that have emerged since the program was introduced.  This includes less licenses granted (to suppliers) than expected, a lack of communication from water suppliers to their customers about what is happening in the market as well as ensuring that customers get the best deal possible. Let’s be honest, this is an extremely new chapter in the life of the newly deregulated water market, so it will inevitably have its highs and lows, only time will tell how things pan out.

If you want to ensure you are getting the best deal and are aware of the options available to you, contact our specialist Water Team, 02475 095185 or email water@utilityteam.co.uk.

Article written by: Gemma Kingsley, Water Consultant