Consulting firm Frost and Sullivan suggested the retail margin in the new market will not be large enough to attract the larger utility companies.
“Even with the opening of the market there is little margin that the retail water service companies can secure with the non-household customers,” said vice president of global environment, water and waste management practice, Frederick Royan.
He said utilities should “focus on their household customers” in the coming years to be “better equipped in capitalising on the retail opening of the household market”, which could open as early as 2020.
Thames Water announced last week that it will exit the non-household retail market when it opens to competition, and will transfer all of its business customers to Scottish retailer Castle Water.
Thames is the largest water utility in the UK, and Royan said the decision to off-load its retail water services “certainly will allow it to focus on its main customer base of households”.
It will also mean the firm can “channel its efforts in the extensive infrastructure that is in much need of rehabilitation and renovation to secure the much-needed efficiency improvements”.
Innovation solutions
“The non-household customer segment is… characterised by a large range of customers from hotels, retail outlets, cafes, supermarkets, industries, sites under the National Health Service and the Defence, etc,” he added.
“The multi-site aspect of many of these customer groups does make it an attractive segment to develop a range of innovative solutions and services to enhance and improve on-site water services.”
In the current scenario of the UK retail water market, all non-household customers in Scotland can choose their retail water service provider whereas in England and Wales non-household customers using five million litres a year or more can choose their service provider.
In April 2017, the threshold of ‘more than five million litres per year’ is to be removed, which will open up the entire non-household customer base.
Thames Water estimated that this will open up the current market estimated to be around £540 million to about £2.5 billion in 2017.