The water market in England became de-regulated in April his year, allowing all businesses, large and small, to switch their water retail supplier.
As a consequence of this reform: no fewer than five regulatory or consumer focussed bodies have been set-up, new suppliers have entered the market, incumbent water retailers have consolidated or exited the market, and utility brokers have a new lease of life with ‘water services’ added to their sales armoury. I’ll seek to answer three key questions posed to me by one reader last week:
- What’s changed?
Prior to this change many businesses paid scant attention to how their water was supplied and how waste water, sewerage, and surface water left their property. Water operators effectively operated as monopolies in geographic areas and unless a business used a whopping 5,000 cubic meters of water, there was no opportunity to change this.
One thing that hasn’t changed is your water wholesaler. This is the network of pipes carrying water from its source up to your premises. In the North-East for example, this is Northumbrian Water and, to provide assurances, the quality of water will not change.
When water is supplied onto your premises and waste water is taken away, this is the function of the water retailer and this operator can now be changed. Parallels can be drawn with the electricity and gas market. Your business energy is managed from source to your premises by national and local network operators but all businesses can change their billing agent, responsible for the supply of electricity and gas on your premises.
- What are the benefits
Monopolies tend to be inefficient, slow to innovate, and can yield excessive profits (often at the expense of consumers). The purpose of opening the water market has four key aims, as identified by the market regulator, Ofwat:
- Better standards of service
- Tailored service offerings
- Advice on saving water
- Lower prices
The water market in Scotland was de-regulated in 2008, hence this is a good point of reference when looking at the benefits likely to be replicated in England.
I must admit, I previously never checked my home water bills and I find that many businesses have never reviewed theirs. A ‘water audit’ sounds like a time intensive activity but can be a fruitful exercise. There is the option to contact your water retailer directly to challenge bills or you can enlist the help of specialist companies offering this service (often on terms with no costs unless a rebate is successfully claimed).
The first aspect to check is water consumption. If there is a spike and seasonality or production factors cannot account for this, a leak may be the cause of this. Secondly, water bills contain many assumptions and, in my dealings with customers, have made many wrongful assumptions.
New water retailers have entered the market. Everflow is one such company. Based in Castle Eden they’ve built a growing reputation for service quality and competitive prices while operating in Scotland and have expanded the team to support their growth into the English market. Another benefit of switching supplier may be to consolidate bills. If you have premises located in different geographic areas, switching to a single supplier can save time on administration and an account manager if scale permits.
- What are the pitfalls
Unlike the energy market, the regulator set a margin on the prices water retailers can charge above their wholesale costs. This is good news for the consumer but means that savings for the majority of small and medium sized businesses will be limited for now (typically I see savings of less than £100 over a three-year period). The next price review is due to be implemented in 2020 and, if we follow the Scottish markets example, margins will increase and there may be more need to shop around in search of savings.
Water companies have had ample time to prepare for this market change but unsurprisingly many were unprepared in practice to decouple their wholesale and retail operations. As a consequence I’ve heard of disgruntled customers who’ve since switched their water retailer but continue to be billed by their old supplier.
Big Phils’ Advice
Unless your business is a large consumer of water, you have multiple premises across different geographic locations and wish to consolidate supplier, or you’re really fed-up with the incumbent water retailer, then you may wish to hold-off. The market, in my opinion, needs time to settle down operationally and the catalyst for meaningful price-wars and tailored service levels aimed at benefitting consumers may be the margin review in a few years’ time. If however, you do wish to switch, then get in touch.