Household water competition still on government agenda

Water minister still considering competition in the domestic water retail market

“Complex issues” surround the decision on whether or not to introduce household retail competition, but it is still on the government’s agenda, water minister Therese Coffey has insisted.

Government first mooted the idea of domestic water retail competition in 2015, when it proposed the market should open by 2020.

Since then, few updates have been given on government’s thinking about the proposal, causing some commentators to speculate that the concept had been quietly dropped by the new administration.

However, Coffey’s new comments, made at Water UK’s City Conference today, confirm that the prospect is still being considered.

To help government reach a final decision on a controversial proposal to introduce domestic water retail competition, it will look closely at the impact of non-domestic market opening on small businesses, said the minister.

She told delegates: “There are complex issues surrounding whether or not to introduce competition in the household retail market. I’m still considering the evidence.”

Ofwat chair Jonson Cox said the regulator expects to hear a decision on residential competition “in the fairly near term”. He added that some companies and investors have accepted that in principle this will happen in some form over the next decade.

Both speakers agreed that the introduction of competition into the non-household market would have a knock-on effect on household customers.

“Market reform is going to play an important part in helping to offset pressures on bills and enhancing resilience,” said Coffey. She added that the opening of the business market should result in improved customer service to household customers as well as businesses.

“I’ll be keenly following the effect of the business retail market. It will be important for us all to learn the lessons of this exciting reform, particularly with regard to impacts on bills, customer service, innovation, and efficiency.”

Cox held a similar view, suggesting that retailers in the new market would demand good service from incumbent monopolies. “This may well be a more effective source of improvement and change than an economic regulator,” he added.

The lack of a formal announcement from government has evoked a feeling of restlessness within the industry. In January, Ofwat chief executive Cathryn Ross called for a swift decision on whether the government will proceed with plans to introduce competition into the domestic retail market.