Instead of being restricted to buying from regional water companies for retail water services, eligible businesses, charities, and public sector customers now have complete freedom in their choice of supplier.
This is only true for businesses and organisations in England (things are different in Wales, see here).
Water is officially Open for business, with Open Water working to deregulate the water market in the UK. This means that the water market is, quite literally, opened; with access and choice improved.
|Who is eligible?||Businesses, charities and public sector organisations|
|What changed?||Previously only larger businesses were able to access a competitive retail water market, now smaller businesses can too|
|Who was now included?||1.2 additional businesses, charities and public sector organisations|
|What could these people now do?||These customers can shop around the market, renegotiate prices and services, and access any supplier who provides water.|
|What was previously the case?||Customers would automatically be provided by their regional water supplier.|
|Who regulates the market?||Ofwat are constantly monitoring the water market. Ofwat are an entity who will intervene in the market’s proceedings if it is necessary to protect customers|
|Do customers who don’t switch miss out?||Ofwat ensured that a price cap was set for water supply. This meant that customers who chose not to switch are protected by limits on the amount they have to pay, so they don’t miss out on improved, competitive water prices.|
Open Water deregulated the retailer water market, meaning that individual retailers are now the ones customers pay for their water services.
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.
The business retail water market works similarly to the gas, electric, and telecom markets we’re more familiar with.
What does Open’s new water market structure look like?
|Wholesalers||Provide water and wastewater services to retailers|
|Retailers||Compete with each other to offer the best deal for selling these services to customers.|
|Customers||Sign a contract with a supplier and are supplied with the appropriate services|
It is a familiar sales structure however the water market isn’t usually discussed nor particularly well known.
Let us take a closer look at these:
- maintain water pipe networks,
- manage and monitor the water being supplied to your business,
- treat wastewater, returning it to the environment.
Wholesale services, and prices, are regulated by Ofwat.
- meter reading,
- customer services.
Some retailers dually provide energy and water (as this is an attractive pull for customers).
- charities and non-profit organisations,
- public sector bodies.
You can access the eligibility guide if you are unsure of your status. Customers can swap their provider at any time, without reason and without penalty.
There are also additional entities present in the retail water market:
|Defra||The Department for the Environment, Food, and Rural Affairs|
|Ofwat||Economic regulator for the market, as well as a licensing authority within the market. Suppliers must be awarded a license from Ofwat to compete in the market, and meet all of Ofwat’s expectations.|
|MOSL||Market Operator who makes sure the market is functioning in a simple and efficient way. MOSL is also responsible for facilitating the transfer of customer data when a customer switches their retail supplier.|
|WICS||The Water Industry Commission for Scotland – regulating the competitive market in Scotland, exclusively.|
For a while larger businesses and organisations have enjoyed the freedom of being able to choose who supplies them with water.
Effectively this means these businesses were able to decide how much they must pay for their utilities.
Until recently this option was only available to these types of organisations. Now, most small businesses, with premises in England, who pay a water bill, are eligible to exercise the freedom of choice.
By deregulating the retail water market, so that suppliers aren’t automatically assigned to a business based off of their location, the market becomes more competitive. This is because now suppliers are competing for customers.
The Open Water programme brought together key figures and data in the market necessary to deliver a competitive water market in April 2017.
Customers that chose not to switch would stay with their original supplier, so the program doesn’t pressure customers to switch, but if a business would like to take advantage of the benefits of a competitive retail water market then they were able to.
What are the benefits of a competitive retail water market?
- value for money increases,
- bills and charges are lowered,
- customer service is improved,
- services can be tailored and niche to capture specific customers (e.g. consolidated billing)
- increases the demand to become more water efficient so that requirements for good deals can be met.
Let us have a closer look at some of these benefits:
Value for Money/Lower Prices:
- lower prices can be negotiated with a retailer,
- customers with similar needs can join together, allowing them to negotiate with retailers to benefit from the large-scale wholesale prices bigger businesses benefit from.
- businesses with more than one premises can combine bills with one supplier for all (no matter their locations) meaning paperwork and administration is easier and cheaper for the customer,
- retailers are having to be behave competitively as custom is not guaranteed which means there is greater incentive to have high quality customer service.
- tailored services include bundle deals, and these tend to appeal and suit specific business needs,
- CASE STUDY – 5 Scottish schools who bundled their costs:
- monitoring consumption,
- repairing leaks causing high usage,
- installing smart meters
- resulted in
- water usage in those 5 schools being cut by 44% overall,
- council savings of more than £56,000 a year in water and wastewater charges for those state schools.
- eligible customers are able to choose their retailer based off of what services they offer, including which suppliers have the most environmentally friendly plans and packages,
- retailers may offer:
- advice on increasing efficiency and reducing waste,
- better, more accurate data on a business’s water usage,
- smart metering.
Furthermore, the specialisation of the business water market has resulted in new opportunities arising for businesses, one example being allowing larger organisations who manage multiple sites to become a self-supply licensee.
Regional water companies still continue to supply your water, treat your wastewater, and maintain pipe networks.
However, licensed retailers are now responsible for buying the wholesale water services (supply and removal) from the regional water companies.
Retailers find a way to package these services, bidding for the best prices, offers, and deals in order to compete against other retailers for customers.
Customers decide on their supplier and are then supplied by the regional water companies whom the retailers contract for those specific, paid for services agreed in your contract.
Customers are able to choose their retailers by looking for the best prices, and services, for their company.