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Update On Water Deregulation UK 2017

What is water deregulation in the UK?

Water deregulation UK 2017 saw the creation of the largest competitive water and wastewater retail market in the world, with over 1.2 million business customers in Wales and England eligible to use the service provider of their choice.

Water deregulation UK has now been in play for over a year. The Water Services Regulation Authority, Ofwat, conducted an assessment of the state of the business retail water market, taking an objective look at how customers have fared. This article contains some of the assessment’s findings related to the impact of water deregulation UK 2017.

The benefits of water deregulation UK 2017

  • Allows customers to shop around and find the best package suited to their needs.
  • Allows customers to switch providers or renegotiate their contracts when they are dissatisfied with the service they receive.
  • Competition for business should encourage retailers to better serve their customers.
  • Retailers can encourage wholesalers to make efficiencies to benefit customers – such as developing customer service portals.

What we have seen since water deregulation UK 2017

  • Greater competition
  • More choice for customers
  • A growing number of retailers have entered the market
  • Smaller new entrants gained around a quarter of switches.
  • Five large customers have become self-supply retailer; this provided additional competitive pressure in the market, gives the customers greater control over their data and helps them save money.

How many customers have switched since water deregulation?

In the first year of water deregulation, about 10% have engaged in the new water market by considering switching, switching or renegotiating contracts. Only three per cent have switched or renegotiated, and around half of customers said they were uninterested in switching.

Higher water consumption and larger customers proved to be more likely to switch than lower consumptions or smaller customers.

  • 89% are aware of deregulation
  • 36% are active in the market compared to microbusinesses.

The main reasons behind switching water suppliers

  • Savings on price
  • Bill consolidation

The benefits of water deregulation

Ofwat say that opening the market has been beneficial both for customers who have switched and for those who haven’t. They estimate that:

  • Customers who switched or renegotiated in the first year saved around £8 million from lower bills.
  • Approximately 270 to 540 million litres of water were saved due to water efficiency measures from switching.
  • Two-fifths of customers who switched say that they saved money or noticed other benefits.
  • Water retailers have made improvements in billing and customer service – such as resolving legacy billing issues.

Challenges of water deregulation

Lack of awareness

Many customers are either not aware of their ability to choose a new retailer, or that they see few benefits in trying to shop around and switch. This is especially true of smaller customers, which may not experience high levels of saving due to lower volumes.

There has also been limited take-up of value-added services such as online portals and water efficiency services. Although there is customer appetite for these services, the industry will need to address other service issues before customers have the confidence to use them.

In 2018, CCWater expressed concern over the state of the non-domestic water market amongst SMEs. This comes off the back of a survey showing that less than 38% businesses in England believe they can switch water supplier.

According to CCWater, awareness and understanding underpins the effectiveness of the market for businesses – large and small – and every effort needs to be made to help SMEs understand the value of engaging with the market to avoid stagnation. Despite working alongside the British Chambers of Commerce and the National Farmers’ Union to raise awareness over the past 18 months, the latest research has shown only a quarter of SMEs are aware that a change has taken place within the non-domestic water market.

Once aware, however, the statistics have gone on to show that almost half of surveyed SMEs gathered more information, with 31% negotiating a better rate with their existing supplier and 24% switching supplier. 70% of larger businesses interviewed expressed interest in finding out more information subsequent to the survey.

Operational issues

  • Billing issues
  • Accuracy of timeliness of meter readings
  • Resolving problems or complaints that are the responsibility of the wholesaler
  • Poor interaction between wholesalers and retailers

The UK government estimated that opening the market would deliver net benefits of around £7 million per year over 30 years and bring further environmental benefits. In order to maintain and reach this goal, the issues mentioned above will need to be addressed to instil greate customer confidence and engagement in the deregulated market.

Opening the floodgates of the water market

1 April 2017 – not an April Fool’s joke, but the day of the most significant change in the UK water market since deregulation. For over a year now, organisations have been able to choose who supplies their water services, regardless of where they are located. Before April 2017, local water companies provided all water and wastewater services. But now, business customers are able to use their retailer of choice.

Although regional sewerage and water companies still provide wholesale services, they now sell these services to intermediary retailers. These retailers buy water and wastewater from the wholesalers and package these with their own services for the consumer.

The benefits of an open water market

Businesses are now able to:

  • Compare water services.
  • Get services customised to meet individual customer needs.
  • Negotiate better prices and services.
  • Benefit from the retailer services such as billing, meter reading and specialist advice to help them understand, manage and reduce their water consumption.

The new regulation also allows for greater innovation, lessens water consumption, and leads to reduced environmental impact as a result.

One year in, how is the new water market performing?

The new energy market has seen established energy brokers align with water retailers to extend their scope of services. Despite the benefits to the business consumer, offering water services is not without its challenges.

From discussions with third party intermediaries (TPIs) about the new water market, Cornwall Insight has found data issues to be one of the most prominent themes.

Data issues TPIs experience include:

  • Limited access to data.
  • Poor data quality.
  • Without access to quality data, TPIs find it challenging to get accurate quotes from retailers.
  • Because many customers do not know who their Supply Point Identifier (SPID) is, it’s not always easy for retailers to show it on bills (as per requirement).
  • TPIs also don’t have access to the Central Market Operating System (CMOS).
  • And even if they did, the CMOS has proven to be an incomplete database, with postcodes that don’t match, inaccurate SPID records, and more inaccuracies – this throws off retailer calculations when quoting a customer.

The water market has some catching up to do…

In 2016, the Competition and Markets Authority (CMA) undertook an investigation into the energy market. They ordered that price comparison websites must be given access to the meter point databases they need to quote customers accurately.

In the energy market, intermediation between supplier and end-customer is valued and well-recognised. But the water market has some catching up to do. By October 2017, only 2.3% of customers had switched suppliers. This indicates that many customers are not informed about the benefits of re-tendering water contracts and services.

Water market deregulation in 2020?

The Water Services Regulation Authority (Ofwat) is considering deregulating the water market in 2020. This would introduce consumer choice and competition in the domestic water market and would potentially restructure the entire regulated water industry.

As the water industry opens the proverbial floodgates even wider, there will be an even greater need to address the data issues currently inhibiting TPI services.

Retailers and suppliers – help SMEs better understand the water market

Over 36 000 businesses have switched water suppliers since the non-household market deregulation in April. More than half of these are low water users –probably SMEs. This is encouraging in the sense that it means big business and smaller enterprises will be benefiting from the open market and will be able to intone on their experiences during these early stages.

The Consumer Council for Water (CC Water) has reported that it has received six times the number of enquiries in comparison with this time last year and 90% of these are SMEs. They have also reported that they have seen some new types of complaints since deregulation; namely not being able to find out about retailers and their tariffs. Off the back of these figures, they have urged retailers and suppliers to assist SMEs in understanding the water market so they can make informed choices going forward.

CC Water has further reported that, although there were some operational issues, there is very little to suggest that any major problems have been encountered in the switching process and that many of these will be waylaid as the market matures. The complaints received by CC Water are largely consistent with previous years with around half relating to billing.

At Smarter Business, we are alive to the fact that SMEs have relatively restricted time to thoroughly explore their options in the open water market. The reality is, if you’re not taking the time to investigate the options, you are likely missing out on valuable cost savings for your business. Contact us today and let our team of experts take the hassle out of comparing rates, renewing contracts, billing, and the switching process.

First quarterly report following water deregulation

On 3 August 2017, Market Operator Services Limited (MOSL) published their first quarterly findings following deregulation of the non-household water market on 1 April 2017. This deregulation means that the water is now part of the competitive marketplace much like gas and energy for charities and businesses.

Although still very much at the grassroots level, MOSL has reported more than 30 000 switches of water and wastewater services, excluding re-negotiations with existing suppliers – 1.4% of the 2.6 million market supply points. 35% of these switches have been for sewage – a fact that has been attributed to previously water-only suppliers acquiring the associated service. It has been reported that 95% of the switches have seen a retention of one supplier for water and wastewater services. Despite pre-existing retailers’ strategies in the build-up to deregulation, 40% of the supply point acquisitions have been made by new entrants to the market.

The relatively low figure has been attributed to a general lack of awareness. In addition to this, comparing, evaluating, and negotiating supplier contracts is a time-consuming exercise for SMEs, many of whom are allegedly not being approached by retailers owing to the low margins. That said, the switching figure comprises 60% low water users which are likely to be SMEs. With the potential for water deregulation to lower costs and improve services within the industry, these may be mere teething problems within the marketplace.

Ofwat is monitoring the progress, as well as complaints. On the same day, as MOSL released their findings, the Consumer Council for Water delivered their complaints statistics, reporting that 370 complaints were received in the same period. This is an increase from the same quarter last year, although complaints still largely related to billing.

With water deregulation in place, your business stands to save on its water and wastewater bills. Contact Smarter Business to discuss your eligibility and for rates comparisons, bill consolidation, renewals, and switches. We look forward to partnering with you to offer smarter business advice.

How can your business benefit from water deregulation UK 2017?

Let Smarter Business do the legwork for you. We’ll take your water needs and consumption patterns into account to compare different water contracts and find you the best possible deal for your business.

Interested in saving on your business water? Let’s chat!