Eight months in, and participants’ opinions on whether the open water market has been a success vary widely.

The water retail market has now been open for just over eight months, and participants’ views on whether or not it has so far been a success have been mixed, to say the least.

There are those who lament the loss of the old market, condemning retailers for offering service to customers which is “worse than that previously offered by wholesalers”. And there are those who fiercely defend the market and insist that everything is going fantastically well. Then there are those who are slightly more speculative, suggesting that it is too soon to tell, and that the market should be given a chance to really get going.

Switching has been on a steady – if somewhat stunted – trajectory since the market opened. The number currently stands at just over 71,000. Switching rates should start to pick up as the market gains momentum, as happened in the Scottish market. However, there are things market participants can, and are, doing to speed up the process. Namely, raise awareness among customers of the benefits above discounts on their bill – which are likely to be miniscule in the short-term.

Whilst it is perhaps unfair to say the market has been a “damp squib” – as was suggested by certain participants before it opened – no one can dispute that there have been many teething issues, which need to be sorted out quickly.

Here are some of the issues and developments we’ve seen over the last eight months.

Billing errors rife in the market

Billing errors have been plaguing the market. A recent snap survey, conducted by Utility Week’s sister title Water.Retail found billing errors to be the area of greatest concern to market players. An overwhelming majority of respondents to the survey (75 per cent) said billing is the most important service retailers offer to customers, and for 33 per cent, billing errors was their biggest concern.

One respondent said it takes a “long time” to get gap sites and SPIDs correctly loaded due to “lack of knowledge on the retailer side”, and one gave rather a generalist view that “virtually all retailers” had so far provided “appalling billing and customer service standards” and that this was “utterly woeful”.

A previous Water.Retail investigation found that data issues were still proving a headache for market participants, as widespread issues with completeness and accuracy of data in the open market “are not improving”. A spokesperson for new entrant Clear Business Water said data quality “has always been a vital component of a successful competitive market”. This will be an area of great focus for retailers in the short-term.

Graph: areas of greatest concern in the retail market

Source: Water.Retail

Are SMEs being well-served?

In an early issue of Water.Retail, Lord Rupert Redesdale, chief executive of The Water Retail Company warned that small and medium enterprise (SME) customers are in danger of being “ignored totally” in the new market.

Despite this, awareness of the market amongst SMEs appears to be on the rise, with the latest Consumer Council for Water (CCWater) figures showing that 43 per cent are now aware that they can choose their water retailer.

However, 39 per cent of SMEs who said they were unlikely to switch or negotiate a better deal felt their organisation did not use enough water to save any money. What’s more, in the next six months, 52 per cent of SMEs are likely to try to find out more about the choices their organisation has.

However, one in five (22 per cent) businesses did not see the need to switch, as they said they were happy with their current deal. This implies they are not aware of the benefits beyond a quick discount on their bill.

Graph: reasons SMEs will not engage with the market

Source: Consumer Council for Water

Inconsistent wholesalers

Inconsistency in wholesale charges, and their policies in general, has not made life easy for retailers since the shadow market (the industry’s “practice run”). In a June issue of Water.Retail, retailers called for the standardisation in the way wholesalers put their pricing together, and the portals they use to interact with retailers.

In a column for Utility Week at the beginning of November, Business Stream chief executive Jo Dow called for the rationalisation of wholesale tariffs and more standardisation around wholesaler policies in general, which she insisted would simplify market processes and significantly improve the experience for customers.

The lack of standardisation in wholesale charges means retailers have to create hundreds of tariff combinations to match the variations across different wholesale regions.

As an example, Dow said that in order to on-board six national customers, Business Stream had to create 2,000 different tariff combinations. “The sheer number of tariffs is making the on-boarding process and day-to-day maintenance of customer accounts, very time intensive and costly for retailers and confusing for customers,” she said.

Market entrant developments

There have been 11 new entrants since market opening. And MOSL chief executive Chris Scoggins said at a recent event that there are several more new entrants going through the market entry process.

The number of retailers listed on the Open Water website now stands at a mighty 23. These are either retail arms of incumbent wholesalers, independent companies which have joined the market from Scotland, or entirely new players, and one or two are only licensed to operate in-area. Some are more ambitious and active than others. By far the biggest gainers of market share have been SES Business Water and Everflow.

The latest to have joined the market is First Business Water. The retailer evolved from a background in energy efficiency, and says sustainability is at the core of its values. We not only want to supply water but empower businesses to use water more efficiently.” Managing director Nish Dattani describes the move as the first step in the company’s journey to become the “UK’s leading water retailer”.

Yorkshire Water is expected to sell its business customers soon, after a spectacular u-turn in February, in which it abandoned plans to transfer existing non-domestic customers to its retail spin-out, Three Sixty. Speculation circulating the market has been that the voracious Castle Water will acquire these customers, growing its business even more.

NWG Business and Anglian Water Business announced their joint venture – Wave – in March, just a few weeks before the market opened. The companies began rolling out the Wave brand to customers in November, and will continue to operate with the tri-brand on customer invoices and externally in the market for the next few months. From March 2018, customers will then start to see the standalone Wave brand present in the market.

Graph: switches to and from the most active retailers

Source: Market Operator Services Limited
Note: Gains and losses logged against Severn Trent Water have been shown against Water Plus. Severn Trent Water intends to exit the market. Three Sixty Water has switched 7 supply points.

The gradual rise of self-supply

Coca-Cola became the latest big business customer to request a self-supply licence. Despite predictions that self-supply would take off in a big way in England, there are currently just three self-supply licensees in the market – Greene King, Whitbread and Marston’s – all of which are being assisted by Waterscan.

Waterscan director Claire Yeates warned that self-supply is not just a “quick win” by cutting out the middle-man to reduce costs, but takes a great deal of hard work and dedication to make it worthwhile.

She told Water.Retail in October that the company is having to turn down many requests from companies for which it doesn’t see self-supply being a commercially viable option. “I’m turning people away because it’s quite a rigorous process to go through and they have to be of the right mindset to be able to do it.”

Market wins

Since the market opened, retailers have been tirelessly vying for market share – and have had varying degrees of success. Some have gone after large water-users, while others have targeted their offering to smaller business customers. And there are, of course, those which are not fussy – and aren’t targeting any specific group.

Taking some of the big customers which have taken the plunge and switched as examples, it is clear that switching is not all about getting a quick discount on their bills. For example, when House of Fraser which has 11 sites switched to Business Stream in 2015, it said it hoped the deal would help it to develop its sustainability strategy.

David Lloyd is another high-profile switcher. It has 84 sites and chose Water Plus as its retailer. Talking about its reasons for switching, the leisure chain said it would like to see efficiency, as well as cost, savings – and that consolidated billing was another major driver.

Here are some of the contracts which have been won and deals which have been struck.

Everflow and Hurlingham Club: 22 November

The Hurlingham Club in London appointed Everflow as its water supplier, following a competitive tender process conducted by the Grand Union Water Company. Grand Union said the process uncovered “billing errors” and locked in “certain savings” for the contracted period. Utility Week understands Everflow has replaced Castle Water as water retailer for the private members’ club which borders the Thames in Fulham.

Business Stream and Regus: 22 November

Business Stream was awarded a new three-year contract to supply water and wastewater services to workspace management and business support service provider Regus Management, which has 18 sites in Scotland. Business Stream will provide consolidated billing and has already helped the company realise more than £100,000 of savings during the past two years.

Water2business and Lush: 27 November

Water2business signed a three-year deal to supply water and wastewater retail services to Lush, the ethical cosmetics, Poole-based company. The deal includes 66 retail stores across England and Scotland, the company’s offices and manufacturing factories.

Castle Water and Business Stream, public sector: 8 November

Castle Water secured a national contract through the Crown Commercial Service (CCS) framework for the provision of water and wastewater services to the public sector in England, worth an estimated £28.9 million. Meanwhile Business Stream was also awarded a contract via the framework, which is potentially worth £10.6 million.

Water2business and Boston Tea Party: 30 August

Water2business signed a deal to supply water and wastewater retail services to Boston Tea Party. The British café chain, which has 20 sites across the South West and in Birmingham, is one of the first in the region to benefit from the deregulation of the market.

AWB and Cameron House: 21 August

Anglian Water Business won a contract to supply water retail services to luxury Scottish spa hotel Cameron House. The four-year deal was brokered by third party intermediary, Inprova Energy, and has enabled Cameron House to secure an improved rate for water and wastewater supply and services. The hotel – located on the banks of Loch Lomond in Scotland – said it wants to meet its environmental goals and reduce water consumption.

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