13.06.16
What water market reforms mean for the public sector
Source: PSE Jun/Jul 16
As significant water market reforms edge ever closer, Adam Cooper, director of retail market opening at Ofwat, explains what these changes will mean for public sector bodies.
From April 2017, if you buy water, wastewater (also known as sewerage) or both services for a business, charity or public sector property or a number of premises, you may be able to switch your water retail service supplier.
Back in 2014, Anglian Water Business and PSE brought together leaders from the water industry, regulators and customers to discuss the future of the water retail market.
At that point, the Water Bill had recently been published but the reality of the market opening remained very distant. The opening of that retail water market is now just 10 months away.
Ofwat (the economic regulator of the water sector in England and Wales), Defra (the Department for Environment, Food and Rural Affairs) and MOSL (Market Operator Services Limited) are working together to open the market, with the aim of improving water efficiency and services for businesses, charities and public sector customers.
Impact on the public sector
For the public sector, this means an ability to shop around and:
- Choose a new supplier for water and wastewater retail services
- Choose a new price and service package
- Negotiate a better deal with your existing retailer
The Open Water market will work like many other open utility markets, such as telecoms, electricity and gas. In the Open Water market, retailers will buy wholesale services, (the physical supply of water and removal of wastewater), and package them up with other retail services. This will provide better value, better service and greater opportunity.
Retailers will compete for your business for services such as billing, water meter reading and customer services. Services that are not affected include water and sewage pipe networks and water and wastewater treatment works.
If a public sector organisation is eligible, there is also the option of supplying retail services to yourself (instead of using a retailer). This is after you have successfully applied for a licence. If you become a licensed self-supplier you:
- Will receive wholesale services direct from the local regional monopoly company and pay only the appropriate wholesale charges
- Will not receive any retail services such as meter reading or help from a supplier if there is a problem on the network
For example, if there is an interruption to your water supply, or a blockage in the public sewer, you would need to speak to the local wholesale company direct.
Benefits of a free English water market
These benefits are varied and will evolve as the market matures. It’s estimated that switching for better prices will have a net benefit to the customer and UK economy of around £200m, supported by new retail entrants striving to support the customer voice.
Retail chains, hospitals and supermarkets will be able to deal with one single supplier across England and Scotland for all their water and sewerage needs. This could significantly reduce administrative costs.
According to leading think tank Policy Exchange, one business customer who receives over 4,000 paper bills a year for their different sites could save £80,000 to £200,000 per year in administration costs if it moved to a single supplier for water and wastewater services, and received a single electronic bill.
More tailored services also mean five schools in Scotland were able to cut their water use by 44%. The retailer helped by benchmarking consumption in 50 schools against national standards, leaks were repaired at the schools with excessively high usage, and smart meters were installed. The council is now saving more than £56,000 a year in water and wastewater charges.
Businesses, charities and public sector bodies with similar needs could also join together to negotiate with suppliers to get a better deal. For example, the Scottish government has recently negotiated a contract with a single supplier for council buildings, hospitals, universities, prisons and the Scottish Parliament. This will save up to £40m over the next four years.
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