Jason Beedell
Director, Research
Since April 2017, 1.2 million businesses, charities and public sector organisations in England can buy water from any licenced water retailer they choose. This means they can change supplier, as is possible for other utilities.
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The thinking being to increase competition and innovation in the sector. Ofwat reports that some businesses are already getting price reductions and others are using water more efficiently due to new apps and services that retail suppliers are launching, such as Water Plus’s leak detection app . Deregulation may also lead to new bundles of utilities and other services.
A similar change happened in Scotland, from 2008. Business Stream, an arm of Scottish Water, claims that around £100 million has been cut from business customers’ bills in six years - half due to price discounts (which started at around 5% and have risen to 15-25%) and half from water efficiency measures (such as water auditing, leak detection, electronic billing and efficiency advice) . Defra believes the change could deliver £200m in benefits to customers and the UK economy over the next 30 years .
According to Ofwat there are no price comparison websites as yet and so businesses have to ask retailer suppliers for their best prices. To reduce some of the administration time, www.englandontap.co.uk has a form which can be sent to all suppliers. The Open Water website outlines how to switch retail supplier.
Currently utility brokers believe it will take a year for the water companies to put the systems in place to allow for swapping suppliers and in the short term they are unlikely to change their prices by much.
Large water users may also become ‘self-suppliers’, resulting in their ability to agree a price directly with a water wholesaler. There are few examples at the moment (Ofwat could only identify one brewery).
On farms, most water comes from the mains water supply and so any discounts could save money, although water use is typically just 1-2% of a farm’s fixed costs . There may also be the opportunity for groups of farmers to negotiate prices with the retail suppliers or even become ‘self-suppliers’. At the time of writing, there is no data on uptake by farmers.
How does the market work?
It will work like many other open utility markets, such as telecoms, electricity and gas. Retail suppliers will buy wholesale services (the physical supply of water and/or removal of wastewater) and offer a package to sell to eligible customers.
Regional water companies will continue to serve non-eligible and household customers.
Who’s who in the market?
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. 14 water companies have applied to become licensed retailers, and further applications are pending, according to Ofwat (as at 140117).
Wholesalers
The regional water companies that own and operate the network of pipes, mains and treatment works. They sell 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.
Ofwat
Ofwat is the economic regulator and the licensing authority for the sector: in order to operate, suppliers must be awarded a licence.
MOSL
Market Operator Services Limited has been set up to create the IT infrastructure to enable switching to happen.
WICS
The Water Industry Commission for Scotland is responsible for regulation of the competitive market in Scotland.
Wales
Wales has chosen not to deregulate and so businesses will continue to be supplied by Welsh Water.
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For more information, contact Jason Beedell