Water market opening: are we heading for inertia?

Ofwat should re-evaluate its policy to deliver immediate tangible savings benefits to all businesses.

All companies, from small family businesses to large corporations, should be able to benefit from water deregulation by shopping around for the cheapest deal similar to finding an energy provider, however, research suggests that average savings to be offered by incumbent suppliers are as low as 2-4 per cent for the 1.2 million businesses with non-domestic contracts in England. While these savings may be significant to larger businesses, smaller businesses will not find them as attractive.

There is little evidence of significant numbers of new entrants to compete with existing suppliers. Utilitywise fears that low numbers of new entrants and furthermore mergers between incumbent suppliers will lead to concentration of market power similar to the big six in the energy market.

Ofwat should re-evaluate its policy to deliver immediate tangible savings benefits to all businesses, not just larger businesses. The Scottish Water market deregulated with similar low margins and low levels of switching ensued before retail margins were increased to successfully stimulate switching. Disappointingly for businesses, Ofwat has decided not to apply the lessons learned in Scotland which would result in a more vibrant market from day one in the deregulated water market in England.

Although the market is opening on 1 April, as at 4pm on 30 March, Utilitywise has only received prices from one supplier to provide to customers who enquire about potential savings.

Is the market really set up to give businesses a better deal, or are we heading for inertia? The regulator has some questions to answer. They must start now in reviewing their policy, so changes can be made for the next formula review or before. The allocation of costs between wholesale and retail MUST be independently assessed to ensure true cost-reflective pricing and give value back to the customer in lower prices. If not the smaller customer will be the last to benefit and yet is the most in need.

To ensure that all businesses benefit from the deregulation of the water market, Utilitywise is combining all three major utilities (water, gas and power) into one package to provide businesses with savings of around 25 per cent off their current bills.

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