Interview: Lord Redesdale and Jacob Tompkins, The Water Retail Company
The Water Retail Company – no-one could argue that this is not a reasonable name for a water retail company. The founders of this new entrant to the retail market are both eminent and outspoken figures in the utilities industry – Jacob Tompkins, currently managing director of Waterwise, and Lord Rupert Redesdale, Liberal Democrat peer and chief executive of the Energy Managers Association.
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As the opening of the retail market draws ever closer, the dynamic pair decided to put the concerns they had about the lack of focus on water efficiency in the market to good use, capitalising on their collective experience to launch their own technology-focused retailer, which will target large water users. And the “boring” name, Tompkins insists, is entirely deliberate.
The company also refuses to engage in “aggressive marketing” tactics. There will be no flash website, no adverts on billboards. Instead, it wants to be “purely judged on what it does”.
Neither Tompkins nor Redesdale can remember the specifics of their first encounter, other than that it was about 15 years ago and “probably something to do with one of the Water Bills”. But a shared interest in efficiency and environmental issues meant they immediately clicked. Now, sitting in the Portcullis House canteen in the heart of Westminster, it’s as if they’ve always known each other as they emphatically tell Utility Week about their new endeavour.
When they met, neither of them took competition seriously, brushing it off as “a bit of a side-issue”, but all that has changed. Now they want to be active players in the market; and even go one step further to suggest they could lead other companies by example.
“If we can help influence the rest of the market, that’s a good way to drive forward water efficiency,” says Tompkins. Redesdale replies with a smile, but only half joking: “No we don’t want them to do that…”
Their initial ambitions are, however, much more conservative. The business currently employs just five staff, and will limit itself to no more than 20 business customers in the first year. It will recruit just five to ten more staff members in that time in an effort to keep costs as low as possible. The aim is to secure £30 million of turnover in its first year, £100 million in year two, and £200 million in year three.
Tompkins is a self-professed tech nerd and, when he officially leaves Waterwise, he will take up the post of chief technology officer at the company. Redesdale will remain chairman and will act as chief executive until a replacement is recruited (a process that has yet to begin).
Tompkins can hardly contain his excitement as he talks about the company’s plans, and has to be reined in every so often by Redesdale, who is slightly more cautious about how much detailed information they should share.
Utility Week quizzed Redesdale and Tompkins about the past, present and future of The Water Retail Company. Here are their answers.
When was the idea that you might start up your own water company first conceived?
JT: “We were talking about it for ages but I think, formally, around June (2016).”
RR: “Our original idea was to offer a service where we did the paperwork for companies to get them through the door, but then we found that nobody wanted that.”
JT: “We have shared interests – and are constantly bemoaning the state of the water market. We both have concerns about it, and decided to put our money where our mouths were, stop complaining and set up a water company to do large-scale water efficiency and push the environmental side.”
RR: “The environmental side is really what we’ve been working on.”
JT: “The market offers a big opportunity for environmental improvements, and there’s enough money in there.”
RR: “The problem is that until now nothing has happened because the monopolies didn’t see it as something they were that worried about.”
JT: “The industry is still dominated by large-scale built infrastructure. We would like to develop a service-based approach where we can drive environmental improvements. And make some money, there is a side part.”
RR: “We’re going to be a competitive company, this is not going to be a charitable organisation.”
JT: “This is not a fluffy green company, we are a proper water company, but we think we can make money and drive environmental improvement at the same time, and reduce prices for businesses.”
How have you found the process of setting up the company?
JT: “Actually, it’s been easier than we thought. You should never say that, but both Ofwat and MOSL [Market Operator Services Limited] have been really helpful. It’s a laborious process, but it’s not a difficult process.”
RR: “We haven’t found it difficult because we’ve got a lot of expertise – we know the kind of answers the DWI [Drinking Water Inspectorate] or the Environment Agency want. It will be difficult for those companies who haven’t got that existing knowledge base to navigate their way through the process.”
JT: “We’re not saying others don’t have expertise, but we’ve been involved in the water sector for a long time, so we know the words to use. A lot of the paperwork is written in ‘water sector-ese’ – confusing if you’re coming in from outside the sector.”
RR: “That’s why companies you might expect to enter the marketplace – big energy companies, for example – will wait and buy companies that are already there.”
What is your target market?
JT: “In our start-up phase, we need to work with larger businesses. As we move forward, we are interested in working with smaller businesses. We can’t do that now because of the financial risk associated with it, but we are interested in pushing water efficiency across all businesses.”
RR: “We won’t take high credit-risk businesses, we’re too small. We will take on larger companies, and we will credit check those companies, because there’s a massive risk for us in taking on a customer if they then don’t pay.”
JT: “We have vulnerable customer terms. We won’t cherry-pick and we won’t chuck customers out, but it is a major risk.”
RR: “No, we will, we’ll chuck customers out as will anybody else.”
JT: “Once we’ve gone through the vulnerable customer protocol.”
RR: “If you’re a company and you’re vulnerable why would we touch you? We’re not going to provide a bespoke service to somebody who won’t pay the bill.”
JT: “We have a protocol for how that works.”
RR: “We have a protocol, but in reality we would be prone to avoid taking on vulnerable customers, because we’re a small company.”
JT: “To clarify, we’re talking financially vulnerable, not vulnerable as in care homes and hospitals – we are taking on those.”
What are the key selling points of the company?
JT: “Transparency. Our profit margins – absolutely everything – will be in the public domain. Hopefully other companies will be transparent as well, but total transparency is one. Also, we’re looking to sign up to the Fair Tax Code – we’d be the first water company to do that.
“We are going to conduct monthly outgoing calls. We will be proactive with customers rather than waiting for them to come to us, which should reduce incoming calls.”
RR: “Another differentiator is technology. We provide every service the customer needs through an app on their phone.”
JT: “Which you’d have thought other companies would be doing.”
RR: “And we plan not to tie our customers into contracts unless we’re offering them further services which they request, which will be a differentiator.”
JT: “Oh yes, that’s another one, there is no tie-in – you can leave. Well you need to stay for a month so your meter can be read. But there’s no contractual binding… we will operate on a rolling one-month contract.”
RR: “We believe in switching. It works in our favour so we don’t want to limit people.”
Lord Redesdale, how will you use your contacts at the Energy Managers Association?
RR: “We want to offer a bespoke service, so we will survey people before we go in. We see it as a partnership with the customer.
“The trouble energy managers have always had when it comes to water is that it has been considered the ‘poor relation’, so they’ve never been able to invest in water in the same way. They all want to do water efficiency, and what we really want to do is to come in and help them to find the best methodology for saving water.”
JT: “It’s like being a detective, we get to go in, look at where all the best solutions are and implement tech solutions to save water. It’s really exciting.”
RR: “We’re going to have a lot of fun doing this because there is a huge amount of technology which hasn’t been used in the past that we’ve got in our arsenal. The funny thing is, not a lot of it is rocket science.
“I can see where the water companies had a problem with innovation in the past. With the AMP cycle, I always get the idea that anybody who had a good idea was taken out and stoned to death, just in case it had any effect on their AMP cycle negotiations.”
What are your expectations for the first few days, weeks and months of the market?
RR: “It’ll be fun for us but a damp squib for most people.
“We’ve gone from an expected 40 providers down to 18 or 20. But I don’t think it really makes a difference, I don’t think ‘day one’ is a big bang moment. For certain companies, market opening will be busy and exciting, for a lot of people it’s going to be a damp squib.
“If it’s a damp squib, nobody should complain that Ofwat hasn’t done its job because I think competition should be judged in the first year or two years, not on the first day.”
JT: “Hopefully the systems will work.”
RR: “They will work because probably 90 per cent of customers won’t switch, because 90 per cent of customers are so small – why would they?”
JT: “But that’s not going to drive sustainability benefits in the UK. The market needs to have environmental benefits, social benefits and economic benefits. If it’s just a case of ‘you were with Midland Water and now you’re with Midland Water Retail, and it’s exactly the same’, then the market hasn’t worked.”
JT: “There still seems to be a very big water company mentality.”
RR: “Well it’s a utility mentality.”
JT: “It is a utility mentality. And we’re not seeing any disruptors coming in yet.”
But there are many companies that claim to be disruptors.
JT: “Yes, they are going to cause disruption alright… but I’m disappointed that there aren’t any other proper Uber-style disruptors. They could’ve come in and set themselves up as a broker for self-serve – they wouldn’t then be regulated.
“There are a couple of disruptive approaches that we have, but I don’t think we can mention those yet.”
RR: “This is one of the reasons there aren’t companies from other sectors in the marketplace – it just hasn’t occurred to people. Water is boring.”
JT: “That’s another point, do some of the incumbent companies even enjoy this? Or have they just set up a company because they feel obligated to do so? We’re doing it because it’s fun. It’s interesting, it’s exciting, we have an objective. Do our competitors have that?”
RR: “I think a few of them will be looking to sell out very quickly.”
Where would you like The Water Retail Company to be in five years?
RR: [Grinning] “Multi-billion pounds’ turnover.”
JT: “Providing water efficiency to as many people as possible.”
RR: “Our aim is to grow the company significantly.”
JT: “We think that our offering is fairly simple, it’s got water efficiency built into it, and it’s a very compelling offer. Our main concern is growing too quickly to be honest.”
RR: “If we reduce the amount of water that all our customers use by 10 per cent, we’d see that as a success. And the two are linked, if we’re large it’s because people see the value of water efficiency.”
JT: “The bigger we are, the better, as long as we stick to our core principles. We don’t want to be massive and make a load of money but sacrifice the service to customers and the water efficiency part.”
RR: “We’ll sell it off to somebody for multi-millions and they can do that… no, but seriously, as a small company, we can’t make projections on money we haven’t earned yet.”
JT: “Our business plan at the moment is projected for three financial years. Five years – we don’t know yet.”
RR: “If we’re successful, we will be 1 per cent of the marketplace.”
JT: “Which is huge.”
RR: “Which for us would be enormous, but we’d still only be 1 per cent of the marketplace.”
JT: “Unless we can go for the Uber-style disruptive approach. There are possibilities around that, but that’s certainly not an aspiration yet.”
RR: “And I don’t think we’ll ever be big enough to go into the domestic marketplace.”
JT: “At the moment we’re doing this. There is no domestic market being opened, and this company would not compete in the domestic market if it did open.
“This is The Water Retail Company for businesses. We’re not doing anything else, we’re not selling bananas on the side, we’re not doing domestic, we’re not expanding and buying an energy company in Mexico. We’re just doing, boringly, what it says.”
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