Tor Water has today informed Ofwat it will exit the water retail market with immediate effect and enter liquidation.
The Devon-based retailer, which has 149 supply points, said it was “not viable” to continue operating in the non-domestic water market, despite having arranged a refinancing package.
Chief executive Jiro Wilson told Utility Week the system was weighted against small companies ever making a profit.
The company is only the second to exit the out-of-household market since it opened in 2017. The first was Aquaflow, which entered liquidation last year, leaving 74 business customers.
In a letter seen by Utility Week, Wilson described the market as “toxic” for unassociated retailers (those which do not have a wholesaler parent company) and added that Ofwat had “overseen an appalling mess and there appears to be a degree of culpability across a range of issues,” while also acknowledging there are “points of excellence and understanding” within Ofwat.
Wilson expressed his disappointment at liquidating the company but added it was the responsible decision.
“I have responsibility to shareholders to not keep pumping money into the business,” Wilson said. “It really is a bridge too far – even though I have a refinancing package on offer – to stay afloat.
“Last week the chief executive of MOSL confirmed a number of my suspicions that since deregulation none of the associated retailers had made any money. They have all lost money.”
He added that Ofwat had been unsupportive when Tor approached the regulator with queries or complaints including the application process to enter the market that Wilson described as “ambiguous and awful”.
He said the market codes are unclear and more should be done to assist new entrants and smaller companies in the market who lose out to businesses with self-supply licences.
“It’s not an environment that is welcoming to small retailers. As part of the deregulation process the self-supply licence was introduced for customers to get the water at the wholesale price, which is great from a customer point of view but it strips the crown jewels from the retail market and makes it even harder for retailers to break even because large customers that were very attractive to win get their own special deal.”
“Something fundamental has to change at the price of supply. It has to be wrong,” Wilson said of the problems Tor experienced trying to generate a profit. “Ofwat need to grow some teeth and be honest with themselves and the market to ask if it’s a fair place to trade.”
Wilson said Tor’s experience was that financial risk was far greater for retailers than wholesalers including a billing system weighted against smaller companies.
“All of the operational risk and burden is on the new entrants into the market. For example – before deregulation, a customer might be on three-month billing, but it could be up to five or six months before the money was paid. Now the retailer must pay for water in advance. We can’t bill for it because the water hasn’t been used yet but we pay in advance.”
Due to these payment terms Wilson said the company remained in default and unable to take on new customers for most of each month.
On Monday, Ofwat announced it had received confirmation from South West Water that it had terminated Tor Water’s wholesale contract due to a series of outstanding undisputed payments.
Georgina Mills, director, business retail market, at Ofwat said: “Tor Water customers should be reassured they don’t need to take any action. There will be no disruption to water and wastewater services and we are working alongside the Market Operator MOSL to allocate affected customers to a new retailer as quickly as possible. Whilst it is difficult to see a company fail, companies entering and exiting a market is a feature of a competitive market.
“We have been pursuing enforcement action against Tor Water over recent months to ensure it complies with its legal obligations. Companies operating in the business retail market must comply with their legal obligations – these were designed to ensure an effective functioning market and to protect customers’ interests”.
Steve Arthur, MOSL’s director of market performance, said: “We will continue to work with Ofwat and the affected parties, including Tor Water, to ensure a quick and smooth transfer of customers to a new retailer(s).
“Our role is to support the market delivering on its commitments to customers for greater choice, service and savings. Part of this role is to work with wholesalers, retailers and Ofwat to ensure business customers are protected under the terms set out in the market codes.”