The Water Bill, which is currently making its way through Parliament, is expected to come into force in 2017 and is likely to allow English businesses and public sector bodies to switch water suppliers irrespective of the amount of water they use. The Bill is touted as a game-changer that will drive competition and innovation across the industry and create enhanced service for customers.
This all sounds perfectly positive, and many appreciate that the industry is in need of reform, but customers need to be the focal point for these changes. This is where some water utilities will fall short. Many water retailers are well equipped to deliver new capital projects, but few will be able to develop the flexibility in billing and customer service that will be required.
In this sense, the UK water market is in a very interesting position. Current monopolies will suffer if they fail to adapt quickly enough in what will rapidly become a competitive retail environment post-2017. The transition will present novel, intricate and difficult experiences that require guidance from people who have witnessed reforming markets first-hand and helped shape the process.
The estimated £2 billion saving to the economy is a strong foundation for the reforms, but customers need to understand what the changes will mean for them. Will they be able to save money by switching providers? Will bills be easier to manage for multi-site businesses? The Water Bill aims to answer these questions in the affirmative, but many utilities do not have the tools currently to manage this transition.
Some water retailers are unable to provide quality customer service within the current market structure; eight water retailers were found to be below the industry average in Ofwat’s most recent service incentive mechanism (SIM) report. The 2017 reforms will demand a serious and well considered approach to managing customers; hundreds of thousands of businesses will be able to switch supplier, and they’ll expect more detailed measurement of their water usage and more information on their bills.
This has been recognised by Ofwat. It has said there is a need to evolve the SIM report, which will become irrelevant for non-household customers in light of the reforms. The report was introduced in 2010 to reward or penalise water companies based on their levels of customer satisfaction. However, the metrics used to measure success or failure in this area will quickly become outdated.
The reforms in the Australian water market in the 1990s provide a valuable learning experience. One thing that stood out was that customer engagement is vital to success. There was a push towards customer-centric IT and billing services, as improvements here provided end customers with a better understanding of their bills and allowed them to save money by altering their water use practices.
Water retailers must remember that they provide a service to paying customers who need to be engaged early in the process to understand the case for change. They need to be interacted with in new ways and
see tangible benefits from the reforms in order to support them. Customer service standards in some areas of the industry are very poor at the minute and clearly require improvement.
As it stands, many retailers are not ready for the reforms. From an IT perspective
they simply do not have sophisticated enough systems in place to manage complex billing processes that customers will demand. More worryingly, there is a shortage of companies currently operating in the UK capable of delivering the products the industry requires.
Water utilities need to start projects now, ensuring sufficient time is available to bed-in new customer service and IT systems that will support demands from the commercial and industrial sector for improved services.
David Brown, vice president for Europe at Gentrack