by Megan Darby
Severn Trent Services (STS) is aiming to switch three multi-site customers by October, delegates at a Major Energy Users’ Council meeting on water competition heard last week.
Its announcement marked the c learest declaration of intent since the usage threshold for customers eligible to switch was reduced from 50 megalitres to five in November last year.
STS commercial development director Jeremy Hobbis said water companies did not have to wait for the retail market to be extended to all non-domestic customers before competing. “Most national customers want a national supplier today, not in five years’ time,” he said.
The non-regulated arm of Severn Trent is in talks with a leisure company with 61 eligible sites, a food manufacturer with seven sites and a services company with 20 sites. Previously, only single-site heavy users have switched and it remains to be seen how the process will work in practice.
While Severn Trent was lining up new customers, Scottish retailer Business Stream was eyeing one of its existing clients. Chief executive Mark Powles displayed an eagerness to talk to the energy manager for the Birmingham NEC, which is currently supplied by Severn Trent.
Consultancy Gemserv is facilitating the planned STS switches. Head of business development Anthony Campion said there was a growing appetite for its services from water companies.
None of the 26,000+ customers currently eligible to switch has done so. Subject to legislation, the water retail market will be opened to all non-domestic customers no earlier than April 2015.
Ofwat mulls margin call
One of the key decisions for Ofwat in setting up a retail market for all non-domestic customers will be how to set default tariffs. If the regulator pegs default tariffs at the level of an efficient company, available margins will be small, deterring potential new entrants and limiting competition.
Conversely, if bigger margins are allowed, customers could initially incur higher charges – although market players argue these would be driven down by increased competition.
This article first appeared in Utility Week’s print edition of 4 May 2012.
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