Opening of the Retail Water Market

The opening of the retail water market will be discussed at EMEX on Wednesday 22 November the ‘Water and Energy Strategy’ Theatre at:

More than six months have passed since businesses in England were given the freedom to shop around for a better water deal. Evan Joanette, Policy Manager at the water watchdog the Consumer Council for Water (CCWater), reflects on a steady start to the non-household retail water market.

Shifting landscape

Choice is not something you would immediately associate with the water industry in England and Wales, where regional monopolies have dominated the landscape since privatisation of the sector in 1989. But the opening of the non-household retail water market on 1 April 2017 marked the biggest shake-up of the industry for more than quarter of a century.

Over the past six months, businesses, charities and public sector organisations have been able to shop around for a different supplier of the retail water services, including billing, meter reading and account management. Around 20 retailers have been competing for their custom, the majority of which were associated with the existing water companies. New entrants have also come on board to try and carve out a niche. That number is likely to grow in the coming months with additional new entrants in the process of applying for a licence from the regulator.

Early switching

The first few months of competition has seen a slow but steady stream of customers dipping into the market, although the vast majority have stayed put. The latest figures published by marker operator, MOSL, suggest around 2 per cent of eligible supply points have switched retailer. The weekly rate of switching has hovered around 1,500 supply points. If that pace holds, we might expect up to four per cent of supply points to have moved to a new retailer by the end of the financial year.

Given that most businesses have at least two or more supply points, what this does not tell us is how many actual customers have made the switch. We also do not know how many have negotiated a better deal with their existing retailer.

Wait and see

Before the market opened, customers told us that their level of interest would depend on whether competition could deliver a clear benefit to their business. Customers wanted enough information to make an informed decision. But the biggest challenge has remained awareness of the market itself.

In July, we carried out a survey of small and medium-sized businesses which revealed only around 4 in 10 SMEs thought they could switch their water services. Many of those that were aware were unconvinced their business would benefit. They either felt they were already paying the right amount for their services, or simply did not feel there was enough on the table to motivate them to switch.

However, there is reason for encouragement too, with half of businesses telling us they would look to explore the market in the next six months. The challenge now for many retailers is convincing businesses they have something that can benefit them.

Improving service

While it might not always be possible to lure customers with big financial savings, the promise of a better service is still appealing to businesses. It is also an area we think many retailers can improve further.

As the watchdog, we are seeing more contact from businesses following the market opening. We expected this as the industry adjusted to the teething problems that competition and switching would inevitably bring. Over half of the complaints we have received from non-household customers since 1 April remain about billing and charges. Clarifying bills should be where retailers are most able to add value to customers and look to innovate.

To their credit, retailers are taking most issues on board and many of them have been working with us to try to ensure they are quickly rectified. We have already seen some of them improve their customer literature and put more resource into their contact centres. Retailers are keen to draw on the industry experience that CCWater has in identifying root causes of complaints and making pragmatic recommendations about how to improve practices and policies. They have also been willing to share good practice between them in industry meetings and forums.

Looking ahead

Over the coming months we want to see the market begin to take service levels beyond what they were before competition. Retailers need to deliver a better service for every customer, from SMEs right up to large multi-sites with higher water demands.

We will also look to see if water retailers are rising to the challenge of helping businesses improve water efficiency, which was a market objective. We know that for very large customers with high consumption, efficiency savings will translate into water bill savings (and energy savings too). But will we then see retailers reaching out to smaller customers in the same way?

CCWater is going to be talking to customers again, this time about their actual experiences in the market. We want to know just how easy or difficult it has been to switch or negotiate a better deal and whether customers are getting what they want and need from retailers.  We expect to publish the results of this research next spring.

Author’s Profile:

Evan is a Policy Manager at CCWater focusing on retail competition. He has 20 years of customer service experience in the private and public sectors. Evan started off managing CCWater’s consumer relations team, pressing water companies to resolve customer disputes. Since 2015, he has helped to shape the water market in England.