Water Retail Issue 2
1
NEWS 13.04.2017
TENDERS W ON
Issue 002 www.water-retail.com / UtilityWeek Intelligence
Will SMEs be well served? Chief executive of the Water Retail Company warns that smaller businesses could miss out in the water market SME customers are at risk of being “ignored totally” in the new water retail market, according to Lord Rupert Redesdale, chief executive of The Water Retail Company. Echoing concerns raised by a number of market participants and observers, Lord Redesdale told Water.Retail he expected retailers to focus on large nondomestic customers with multiple sites and the potential to pay for added-value services. However, other retailers say they will tailor offerings for SME customers and, despite the low margins available in the market, retailers can effectively serve smaller customers using automation and low-cost channels. SMEs make up 99 per cent of the UK’s 5.5 million businesses and, according to Redesdale, they constitute about 90 per cent of business customers in the water market. The main focus at market opening has been on large users and multi-site operations. These sectors add volume and scope out-of-region. MeanBEHIND THE HEADLINES
while, smaller customers, which are generally harder to engage, are thought to be likely to wait before deciding to switch. Allen Creedy, environment policy chairman at the Federation of Small Businesses, suggested that “if we get the market right”, competition will drive up services, standards and trust for small business customers in the longer term. In the short term, most small firms will not see significant price drops. Redesdale suggested SMEs may be put off switching by these minimal savings, and, for many retailers, it may be uneconomic to take them on without a switching fee. One retailer, Everflow, disagreed. “We are an SME specialist and we think there are huge opportunities for SME customers to both save money and receive better service,” said customer services director Josh Gill. All other retailers that spoke to Water.Retail say they have specific offerings for SME customers, and will not be going after large industrial and commercial users exclusively.
“It’s worrying that concerns about data quality are emerging” A KEY RELATIONSHIP
WATER MARKET VIEW ELLEN BENNETT
The revolving door at water retailers swung again this week, with the news that South East Water Choice managing director James Dubois has left the company, nine months after having taken the helm.
A pessimist might suggest this shows a lack of confidence in the market – that those who are best informed aren’t enthused enough to hang around. But let’s be optimists and look at it differently – the
Pennon Water Services agreed that SMEs have been “largely forgotten”. Director Richard Stanbrook said: “SMEs are a group we’re keen to ensure benefits from the competitive market.” South East Water Choice’s former managing director James Dubois agreed, suggesting that SMEs “will still be able to access the best deals” by contacting retailers directly or through third party intermediaries. Business Stream chief executive Johanna Dow said there is “inevitably much focus” on bigbrand, multi-site contracts. But for the market to succeed, retailers must ensure businesses of all sizes understand the choices available to them and benefit from competition.
WE SAY
• L ord Redesdale is not alone in believing the market will fail SME customers – many others say the same behind closed doors • Automation could cut the cost of serving SME customers – but they cannot expect the same key account management as larger businesses • The success of the market in serving SMEs will indicate the viability of a domestic water market
work of market opening has been done and those at the top are making way for business changes, perhaps for consolidation, as the market matures. And it’s been a solid start. There have been a small but healthy number of switches in addition to the pre-switches created by business transfers, and a num-
u Contract wins for NWG Business NWG Business has won contracts to supply water and wastewater retail services to an agricultural equipment supplier and a large independent travel agent. Carrs of Billington has 34 sites across the UK and supplies agricultural products to ruminant farmers. Hays Travel is the UK’s largest independent travel agent, with 133 sites nationwide. NWG Business was one of the first retailers to be granted its water supply and sewerage licence in October 2016. At the end of March, the company announced plans to team up with fellow incumbent retailer Anglian Water Business to create a new business – Wave. u Everflow scores Newcastle FC and Europcar water deals Scottish retailer Everflow is to supply water, wastewater and trade effluent services to car hire company Europcar and Newcastle United Football Club. Everflow customer services director Josh Gill said the company was “delighted” to be chosen by the two organisations. The retailer will work with Europcar and Newcastle United to “reduce their costs further through effective water monitoring and management”. Everflow was granted its licence for the Scottish market in October 2015 and for the English market in March 2017. As well as providing retail services, it is looking to partner business customers in England that want to supply water and wastewater retail services.
ber of larger accounts are changing hands. But one relationship will be key to long-term success. Wholesalers must quickly develop a new market mentality, where all retailers are their customers, to be served fairly, effectively and efficiently. So it’s worrying that concerns about data quality are already
emerging. Some retailers have told Ofwat that there are gaps in wholesalers’ data that impair their ability to provide prices and quotations to customers. This simply isn’t good enough. Retailers have called on Ofwat to monitor and compare wholesalers’ performance on data, and the regulator should heed that request.
water.Retail utility-week.co.uk/retail / UtilityWeek Intelligence
RISKING IT! Protecting customers
2
CUSTOMERS 13.04.2017
from rogue brokers, p3
Efficiency, not low prices, is the key to profit Water efficiency has been identified as one of the big wins of the open water retail market. With tight margins expected to limit the direct discounts retailers will be able to offer customers, it is from value-added services such as water efficiency that the biggest savings will be made. In the second of an exclusive series of market surveys, Water.Retail spoke to 11 water retailers about what they will offer their customers on water efficiency. Water efficiency is a key service that customers from SMEs to large corporates have been asking for. The Consumer Council for Water said in a January report, ahead of market opening, that all businesses can benefit from using water efficiently. In the Scottish market, Business Stream reported in 2015/16 that water consumption had been reduced by 24 billion litres since 2008. It also reported this as £53 million in water efficiency savings and £7 million in reduced energy costs. As it stands, water retailers have no formal targets for water efficiency, although regulator Ofwat has made it clear it wants retailers to respond to customer demand for more bespoke added-value services and
technology. “This would include tackling their bills through water efficiency, and leakage and offering water efficiency advice, plans to trial new technology, mostly for as well as lower prices for customers, free, as part of its core offering. The Water smarter use of technology and improved Retail Company was set up because the two customer service,” says Ofwat founders were “worried that the • There is evidence chief executive Cathryn Ross. market would be about a race of innovation and All retailers that spoke to to the bottom on price” and nodifferentiation on Water.Retail offer basic efone would do water efficiency. water efficiency in ficiency services, including au“There is a lot of tech out there the new market tomated meter reading (AMR) that just has not been used and • Helping customers meters for rent or sale, plus we are happy to trial all of it,” save water is the best says co-founder and chief techinstallation; water efficiency way to help them audits, desktop review and nology officer Jacob Tompkins, save money – but site visit; site league tables; who is in ongoing talks with the limited savings efficiency reports and action manufacturers and inventors. may not motivate plans; and assigned account He suggests most businesses customers to switch, could reduce their water conmanagers. Some, but not all, particularly at the also offer free water-saving sumption by about 10 per cent smaller end of the kits such as flush bags and through simple water-efficiency market tap aerators. And one or two measures. “I would like to see retailers, for example Busithe market deliver these savWE ness Stream, NWG Business ings, which will have financial SAY and Affinity for Business, say they will and environmental benefits.” offer sewer rehabilitation if a pipe or sewer Waterwise director of projects and prosupplies mains water only to the property grammes Aaron Burton believes customer owner and is thus outside the wholesalers’ behaviour change is key to reducing water responsibility. use, and the group is building this into its One company has based its entire service commercial water-efficiency training prooffering on helping large customers reduce gramme. It is in final discussion with retailers. He says there is a need for more research Matrix – comparing service offerings from 11 companies on behaviours and water use in businesses, AMR Efficiency Efficiency Site league Free water- Sewer Sewerage and Waterwise is “open to working with installation audit report tables saving kit rehabilitation metering retailers and academics to develop this and Castle Water ✔ ✔ ✔ ✔ ✔ ✔ ✔ enable future innovations”. There is a risk, Water Choice ✔ ✔ ✔ ✔ ✔ ✖ ✖ Burton argues, that “only ‘top tips’ and SES Business Water ✔ ✔ ✔ ✔ ✔ ✖ ✖ marketing-based approaches will be used, Business Stream ✔ ✔ ✔ ✔ ✔ ✔ ✔ without investment in broader behaviourNWG Business ✔ ✔ ✔ ✔ ✔ ✔ ✖ change approaches”. Waterscan ✔ ✔ ✔ ✔ ✖ ✖ ✖ Another risk is that retailers will “hype” Water Plus ✔ ✔ ✔ ✔ ✔ ✔ ✔ their offerings. One senior market figure Affinity for Business ✔ ✔ ✔ ✔ ✖ ✔ ✖ warned there was “nothing new” in many The Water Retail Company ✔ ✔ ✔ ✔ ✔ ✔ ✔ of the services on offer, and that companies Anglian Water Business ✔ ✔ ✔ ✔ ✔ ✖ ✖ were effectively talking up practices that had ADSM ✔ ✔ ✔ ✔ ✔ ✔ ✔ long been offered as standard. Ultimately, in the new market, customers will decide.
DEEP DIVE
EARLY SWITCHERS
A total of 8,876 premises switched water retailer in the first week of the competitive market. The figure refers to switches that were customerdriven. It doesn’t include instances where customers were automatically transferred to the acquiring retailer where the incumbent had chosen to exit. Of those that switched, about 7,000 had signed up to do so
before market opened on 1 April, meaning the remaining 1,876 made the switch after market opening. The figures were published on 7 April by MOSL (Market Operator Services Limited), which operates the market.
Switchers that decided to switch after market opening (1,876)
Switchers that signed up before market opening (7,000)
water.Retail utility-week.co.uk/retail / UtilityWeek Intelligence
DROUGHT How Lord Redesdale
3
MARKETPLACE 13.04.2017
would tackle water shortage, p4
Can a voluntary TPI code keep the rogues out? Following a consultation, regulator Ofwat has launched a non-binding code of conduct for third party intermediaries, and reiterated its request for direct regulatory powers, a decision that it says rests with government ministers Ofwat has backed away from a bid to regulate third party intermediaries (TPIs) by the back door, calling for formal powers from government. The regulator has chosen not to force retailers to work only with accredited third party intermediaries (TPIs), despite having the power to do so. Following consultation, it has launched a non-binding code of conduct for TPIs, and reiterated its request for direct regulatory powers. Ofwat chief executive Cathryn Ross believes TPIs will play a “big role” in the market as it evolves, and warns the regulator’s lack of powers “could disadvantage TPIs if customers have less confidence in the service they provide”. She tells Water.Retail: “We would like formal regulatory powers in this area as a backstop, but that decision rests with government.” The regulator received 22 responses to its consultation from a range of stakeholders including licensed retailers, incumbent water companies, energy companies, consumer groups, TPIs themselves, and the Information Commissioner’s Office. Although some respondents expressed strong support for the proposal to regulate brokers indirectly via retailers, Ofwat said it does not deem it appropriate to require
retailers to work only with TPIs accredited to “It is good to set down the expectations a code of conduct. of TPIs, but no code of practice – whether This, it said, could result in a proportion voluntary or otherwise – can be relied on if of the TPI sector being forced out of the mar- there is no redress scheme attached to it.” ket, regardless of whether those TPIs had Peter Sceats, co-founder of water broker engaged in poor practice. It could also the Grand Union Water Company, insists potentially limit new market that energy brokers “should be WE entrants and place cost burand should have been” reguSAY dens on industry that would be lated by Ofgem, and that those passed on to customers. • The water sector entering the water market Ross says the regulator is cannot risk the should be regulated by Ofwat. “doing what it can to fill the kind of reputational Ofgem has slightly stronger, gap” of a lack of regulation by damage suffered by but still limited, powers to setting out principles for codes the energy industry regulate broker activity in the of conduct that TPIs can sign • Ofwat has refused a energy market under the Busiup to voluntarily, and by “beworkaround to the ness Protection from Misleading transparent” about which problem of regulating ing Marketing Regulations TPIs have signed up. TPIs and ministers (BPMMRs). The Competition In its decision document, must now give it and Markets Authority and the regulator said it will “use formal powers trading standard authorities its standing and reputation” currently have roles in ensurto highlight which voluntary ing customers have the correct codes of conduct follow its principles and information when switching to alternative which TPIs have signed up to such codes. retailers, and Ofwat says it will engage with A spokesman for the Utilities Intermedithe UK government to become a designated aries Association said: “Ofwat have gone as enforcement authority for the BPMMRs. far as they can within their legal limitations. Meanwhile, the Department for the They have declared that they cannot even Environment, Food and Rural Affairs says approve industry codes, which is in fact far it will “keep under review” whether Ofwat more transparent than the gas and electricshould have powers to prevent inappropriate ity regulator has been. marketing activities, as the market evolves.
WHOLESALER PROFILE THAMES WATER
Who do you believe owns the customer – wholesaler or retailer? There is no longer an exclusive relationship with the customer. The retailer will need to be the primary contact for nonemergency contact and billing, and the wholesaler continues to provide water and wastewater services in the same way they did before market opening. We feel very strongly about the fact that we still have an essential service to provide to all our customers in the Thames Water region.
MARKET BRIEFING
Sarah McMath Managing director of wholesale water
Market opening – challenge or opportunity? Both. It’s been hard work to get everything in place for market opening. Not just within our company, but working together across the industry and with MOSL on CMOS system development, Ofwat on the regulatory framework and Defra on the legislative side. The main opportunities will be for retailers and customers, but it will be interesting to see what requests retailers make to wholesalers on behalf of their customers as the market develops.
What is your promise to retailers? We are totally committed to supporting the non-household market and customers. This means providing high-quality, cost-effective and responsive wholesale services to all licenced retailers, fully supporting the market operator, and seeking to ensure there is a level playing field for all market participants. We aim to work successfully with all retailers, in ensuring quality, timely and effective delivery of services to non-household customers.
Do you believe wholesale tariffs should be negotiable? As a monopoly supplier, we are required to provide services on a nondiscriminatory basis and in compliance with Ofwat’s wholesale charging rules – published 24 November 2016 – which set out the framework under which wholesale tariffs are set. On this basis, wholesale tariffs are not negotiable under the current regulatory framework and we believe this is the correct approach.
To what extent do the retailers differ in their approach to and working relationship with wholesalers? We will provide the same level of service to all retailers and their customers regardless of the working relationships. What is your view on the numbers of retailers operating in the market? There are 20 Ofwat licenced retailers, according to the Open Water website, and we have signed contracts with 16 of them so far to operate in our area.
water.Retail utility-week.co.uk/retail / UtilityWeek Intelligence
4 What is your promise to customers? We promise to help them reduce the amount of water they are using while providing a competitive price. Who are your top three competitors? I have no idea – yet. I’m really not sure how competitive some of the retailers are going to be.
MARKET PROFILE
The Water Retail Company Lord Rupert Redesdale, CEO Company aims: • Gain 20 business customers in the first year • Recruit five to 10 more staff • Secure £30 million of turnover in its first year, £100 million in year two, £200 million in year three
USP
If you were CEO of Ofwat for a day, what would you do? I would start concentrating on the fact that we won’t have enough water in 10 or 15 years’ time. I know [Ofwat chief executive] Cathryn Ross is looking at that at the moment, but I would see drought or flood, which are two sides of the same coin, as being the norm in a few years’ time. Climate change is going to change how we view water in this country. In the past, I did everything I could to turn Ofwat into an environmental, rather than just a fiscal, regulator. It has really got to take the fact that we might not have enough water seriously. What are your views on the number of retailers that are operating in the market at present? I think they will increase. I thought there were going to be vast
MARKETPLACE 14.04.2017
numbers of retailers, but I don’t think there are now, for two reasons: the process is reasonably complex and you have to understand the water market; and, with the below-5 per cent margin, is it a marketplace that is going to be attractive to a lot of people? I’m really not sure. We might see consolidation down to, say, a big six. It’s all to do with scale – the only way you can mitigate the risk of bad debt is scale. You’ll get niche players, but I actually think you’re going to get a lot more exits from the marketplace, and you’ll end up with a small number of very large operators. The question is, does that constitute successful competition? To what extent do wholesalers differ in their approach to and working relationship with retailers? We’ve found nothing but positive things about the wholesalers when we signed up with them. We thought they were going to be difficult, but I think they’re looking to be very easy, especially with new entrants. The really difficult relationships are going to be between the wholesalers and their new retail arms. The wholesalers don’t want to end up in court for being anti-competitive.
we ask three key individuals within the company what makes their business stand out from its competitors
LORD REDESDALE, CHIEF EXECUTIVE What we are offering is a service based purely on helping the customer reduce their bills through water efficiency. The basis of that is environmentalism, but it’s also fast-tracking to where the market is going to be anyway. Wouldn’t it be great if we had a marketplace based on retailers actively seeking to reduce their customers’ bills because they know that is where the competition element in the market resides?
Connecting wholesalers, retailers, brokers and customers
JACOB TOMPKINS, CHIEF TECHNOLOGY OFFICER Our approach is very straightforward. No complicated contracts, no spend-to-save options, no fancy websites. We simply offer a wholesale charge plus percentage model and as part of that we do water efficiency and implement technology for free. Our aim is to keep our costto-serve low, to offer competitive prices and to develop a close relationship with each customer and to work with them using state of the art technology to reduce water use, surface run-off and sewer discharges. EDITORIAL STAFF Content director Ellen Bennett [email protected] News editor Lois Vallely [email protected] Production controller Sharon Miller [email protected] Publisher Amanda Barnes
And because we are deliberately keeping our customer numbers low and expanding slowly we have the best staff-tocustomer ratio in the business, which means we will have time to talk to all our customers regularly and to tailor our service to their needs.
EMILY WORTHING, KEY ACCOUNT MANAGER
The distinct nature of our offering is based on two points – our approach to customer service and our focus on water efficiency. We have designed our customer policy around the concept of proactive customer SUBSCRIPTIONS/REPRINTS [email protected]
020 8955 7045 Subscription rates 12-month subscription: £507 Discounted 24-month subscription: on request
contact, meaning that our clients will interact more with our team compared with previous experience. This means that we can ensure that our customers are happy with our service and deal with issues promptly and directly. The second element that makes us unique is our commitment to water efficiency. Our team is passionate about water saving and protecting the environment so our efficiency offering is comprehensive and included in the unit rate on every contract, enabling our customers to make significant savings while reducing their environmental footprint.
For subscription and sales enquiries, including details of our group and enterprise discounts, contact: Peter Bissell, content sales manager, water.Retail [email protected] 01342 332057 Published by: Faversham House
NEWS 13.04.2017
TENDERS W ON
Issue 002 www.water-retail.com / UtilityWeek Intelligence
Will SMEs be well served? Chief executive of the Water Retail Company warns that smaller businesses could miss out in the water market SME customers are at risk of being “ignored totally” in the new water retail market, according to Lord Rupert Redesdale, chief executive of The Water Retail Company. Echoing concerns raised by a number of market participants and observers, Lord Redesdale told Water.Retail he expected retailers to focus on large nondomestic customers with multiple sites and the potential to pay for added-value services. However, other retailers say they will tailor offerings for SME customers and, despite the low margins available in the market, retailers can effectively serve smaller customers using automation and low-cost channels. SMEs make up 99 per cent of the UK’s 5.5 million businesses and, according to Redesdale, they constitute about 90 per cent of business customers in the water market. The main focus at market opening has been on large users and multi-site operations. These sectors add volume and scope out-of-region. MeanBEHIND THE HEADLINES
while, smaller customers, which are generally harder to engage, are thought to be likely to wait before deciding to switch. Allen Creedy, environment policy chairman at the Federation of Small Businesses, suggested that “if we get the market right”, competition will drive up services, standards and trust for small business customers in the longer term. In the short term, most small firms will not see significant price drops. Redesdale suggested SMEs may be put off switching by these minimal savings, and, for many retailers, it may be uneconomic to take them on without a switching fee. One retailer, Everflow, disagreed. “We are an SME specialist and we think there are huge opportunities for SME customers to both save money and receive better service,” said customer services director Josh Gill. All other retailers that spoke to Water.Retail say they have specific offerings for SME customers, and will not be going after large industrial and commercial users exclusively.
“It’s worrying that concerns about data quality are emerging” A KEY RELATIONSHIP
WATER MARKET VIEW ELLEN BENNETT
The revolving door at water retailers swung again this week, with the news that South East Water Choice managing director James Dubois has left the company, nine months after having taken the helm.
A pessimist might suggest this shows a lack of confidence in the market – that those who are best informed aren’t enthused enough to hang around. But let’s be optimists and look at it differently – the
Pennon Water Services agreed that SMEs have been “largely forgotten”. Director Richard Stanbrook said: “SMEs are a group we’re keen to ensure benefits from the competitive market.” South East Water Choice’s former managing director James Dubois agreed, suggesting that SMEs “will still be able to access the best deals” by contacting retailers directly or through third party intermediaries. Business Stream chief executive Johanna Dow said there is “inevitably much focus” on bigbrand, multi-site contracts. But for the market to succeed, retailers must ensure businesses of all sizes understand the choices available to them and benefit from competition.
WE SAY
• L ord Redesdale is not alone in believing the market will fail SME customers – many others say the same behind closed doors • Automation could cut the cost of serving SME customers – but they cannot expect the same key account management as larger businesses • The success of the market in serving SMEs will indicate the viability of a domestic water market
work of market opening has been done and those at the top are making way for business changes, perhaps for consolidation, as the market matures. And it’s been a solid start. There have been a small but healthy number of switches in addition to the pre-switches created by business transfers, and a num-
u Contract wins for NWG Business NWG Business has won contracts to supply water and wastewater retail services to an agricultural equipment supplier and a large independent travel agent. Carrs of Billington has 34 sites across the UK and supplies agricultural products to ruminant farmers. Hays Travel is the UK’s largest independent travel agent, with 133 sites nationwide. NWG Business was one of the first retailers to be granted its water supply and sewerage licence in October 2016. At the end of March, the company announced plans to team up with fellow incumbent retailer Anglian Water Business to create a new business – Wave. u Everflow scores Newcastle FC and Europcar water deals Scottish retailer Everflow is to supply water, wastewater and trade effluent services to car hire company Europcar and Newcastle United Football Club. Everflow customer services director Josh Gill said the company was “delighted” to be chosen by the two organisations. The retailer will work with Europcar and Newcastle United to “reduce their costs further through effective water monitoring and management”. Everflow was granted its licence for the Scottish market in October 2015 and for the English market in March 2017. As well as providing retail services, it is looking to partner business customers in England that want to supply water and wastewater retail services.
ber of larger accounts are changing hands. But one relationship will be key to long-term success. Wholesalers must quickly develop a new market mentality, where all retailers are their customers, to be served fairly, effectively and efficiently. So it’s worrying that concerns about data quality are already
emerging. Some retailers have told Ofwat that there are gaps in wholesalers’ data that impair their ability to provide prices and quotations to customers. This simply isn’t good enough. Retailers have called on Ofwat to monitor and compare wholesalers’ performance on data, and the regulator should heed that request.
water.Retail utility-week.co.uk/retail / UtilityWeek Intelligence
RISKING IT! Protecting customers
2
CUSTOMERS 13.04.2017
from rogue brokers, p3
Efficiency, not low prices, is the key to profit Water efficiency has been identified as one of the big wins of the open water retail market. With tight margins expected to limit the direct discounts retailers will be able to offer customers, it is from value-added services such as water efficiency that the biggest savings will be made. In the second of an exclusive series of market surveys, Water.Retail spoke to 11 water retailers about what they will offer their customers on water efficiency. Water efficiency is a key service that customers from SMEs to large corporates have been asking for. The Consumer Council for Water said in a January report, ahead of market opening, that all businesses can benefit from using water efficiently. In the Scottish market, Business Stream reported in 2015/16 that water consumption had been reduced by 24 billion litres since 2008. It also reported this as £53 million in water efficiency savings and £7 million in reduced energy costs. As it stands, water retailers have no formal targets for water efficiency, although regulator Ofwat has made it clear it wants retailers to respond to customer demand for more bespoke added-value services and
technology. “This would include tackling their bills through water efficiency, and leakage and offering water efficiency advice, plans to trial new technology, mostly for as well as lower prices for customers, free, as part of its core offering. The Water smarter use of technology and improved Retail Company was set up because the two customer service,” says Ofwat founders were “worried that the • There is evidence chief executive Cathryn Ross. market would be about a race of innovation and All retailers that spoke to to the bottom on price” and nodifferentiation on Water.Retail offer basic efone would do water efficiency. water efficiency in ficiency services, including au“There is a lot of tech out there the new market tomated meter reading (AMR) that just has not been used and • Helping customers meters for rent or sale, plus we are happy to trial all of it,” save water is the best says co-founder and chief techinstallation; water efficiency way to help them audits, desktop review and nology officer Jacob Tompkins, save money – but site visit; site league tables; who is in ongoing talks with the limited savings efficiency reports and action manufacturers and inventors. may not motivate plans; and assigned account He suggests most businesses customers to switch, could reduce their water conmanagers. Some, but not all, particularly at the also offer free water-saving sumption by about 10 per cent smaller end of the kits such as flush bags and through simple water-efficiency market tap aerators. And one or two measures. “I would like to see retailers, for example Busithe market deliver these savWE ness Stream, NWG Business ings, which will have financial SAY and Affinity for Business, say they will and environmental benefits.” offer sewer rehabilitation if a pipe or sewer Waterwise director of projects and prosupplies mains water only to the property grammes Aaron Burton believes customer owner and is thus outside the wholesalers’ behaviour change is key to reducing water responsibility. use, and the group is building this into its One company has based its entire service commercial water-efficiency training prooffering on helping large customers reduce gramme. It is in final discussion with retailers. He says there is a need for more research Matrix – comparing service offerings from 11 companies on behaviours and water use in businesses, AMR Efficiency Efficiency Site league Free water- Sewer Sewerage and Waterwise is “open to working with installation audit report tables saving kit rehabilitation metering retailers and academics to develop this and Castle Water ✔ ✔ ✔ ✔ ✔ ✔ ✔ enable future innovations”. There is a risk, Water Choice ✔ ✔ ✔ ✔ ✔ ✖ ✖ Burton argues, that “only ‘top tips’ and SES Business Water ✔ ✔ ✔ ✔ ✔ ✖ ✖ marketing-based approaches will be used, Business Stream ✔ ✔ ✔ ✔ ✔ ✔ ✔ without investment in broader behaviourNWG Business ✔ ✔ ✔ ✔ ✔ ✔ ✖ change approaches”. Waterscan ✔ ✔ ✔ ✔ ✖ ✖ ✖ Another risk is that retailers will “hype” Water Plus ✔ ✔ ✔ ✔ ✔ ✔ ✔ their offerings. One senior market figure Affinity for Business ✔ ✔ ✔ ✔ ✖ ✔ ✖ warned there was “nothing new” in many The Water Retail Company ✔ ✔ ✔ ✔ ✔ ✔ ✔ of the services on offer, and that companies Anglian Water Business ✔ ✔ ✔ ✔ ✔ ✖ ✖ were effectively talking up practices that had ADSM ✔ ✔ ✔ ✔ ✔ ✔ ✔ long been offered as standard. Ultimately, in the new market, customers will decide.
DEEP DIVE
EARLY SWITCHERS
A total of 8,876 premises switched water retailer in the first week of the competitive market. The figure refers to switches that were customerdriven. It doesn’t include instances where customers were automatically transferred to the acquiring retailer where the incumbent had chosen to exit. Of those that switched, about 7,000 had signed up to do so
before market opened on 1 April, meaning the remaining 1,876 made the switch after market opening. The figures were published on 7 April by MOSL (Market Operator Services Limited), which operates the market.
Switchers that decided to switch after market opening (1,876)
Switchers that signed up before market opening (7,000)
water.Retail utility-week.co.uk/retail / UtilityWeek Intelligence
DROUGHT How Lord Redesdale
3
MARKETPLACE 13.04.2017
would tackle water shortage, p4
Can a voluntary TPI code keep the rogues out? Following a consultation, regulator Ofwat has launched a non-binding code of conduct for third party intermediaries, and reiterated its request for direct regulatory powers, a decision that it says rests with government ministers Ofwat has backed away from a bid to regulate third party intermediaries (TPIs) by the back door, calling for formal powers from government. The regulator has chosen not to force retailers to work only with accredited third party intermediaries (TPIs), despite having the power to do so. Following consultation, it has launched a non-binding code of conduct for TPIs, and reiterated its request for direct regulatory powers. Ofwat chief executive Cathryn Ross believes TPIs will play a “big role” in the market as it evolves, and warns the regulator’s lack of powers “could disadvantage TPIs if customers have less confidence in the service they provide”. She tells Water.Retail: “We would like formal regulatory powers in this area as a backstop, but that decision rests with government.” The regulator received 22 responses to its consultation from a range of stakeholders including licensed retailers, incumbent water companies, energy companies, consumer groups, TPIs themselves, and the Information Commissioner’s Office. Although some respondents expressed strong support for the proposal to regulate brokers indirectly via retailers, Ofwat said it does not deem it appropriate to require
retailers to work only with TPIs accredited to “It is good to set down the expectations a code of conduct. of TPIs, but no code of practice – whether This, it said, could result in a proportion voluntary or otherwise – can be relied on if of the TPI sector being forced out of the mar- there is no redress scheme attached to it.” ket, regardless of whether those TPIs had Peter Sceats, co-founder of water broker engaged in poor practice. It could also the Grand Union Water Company, insists potentially limit new market that energy brokers “should be WE entrants and place cost burand should have been” reguSAY dens on industry that would be lated by Ofgem, and that those passed on to customers. • The water sector entering the water market Ross says the regulator is cannot risk the should be regulated by Ofwat. “doing what it can to fill the kind of reputational Ofgem has slightly stronger, gap” of a lack of regulation by damage suffered by but still limited, powers to setting out principles for codes the energy industry regulate broker activity in the of conduct that TPIs can sign • Ofwat has refused a energy market under the Busiup to voluntarily, and by “beworkaround to the ness Protection from Misleading transparent” about which problem of regulating ing Marketing Regulations TPIs have signed up. TPIs and ministers (BPMMRs). The Competition In its decision document, must now give it and Markets Authority and the regulator said it will “use formal powers trading standard authorities its standing and reputation” currently have roles in ensurto highlight which voluntary ing customers have the correct codes of conduct follow its principles and information when switching to alternative which TPIs have signed up to such codes. retailers, and Ofwat says it will engage with A spokesman for the Utilities Intermedithe UK government to become a designated aries Association said: “Ofwat have gone as enforcement authority for the BPMMRs. far as they can within their legal limitations. Meanwhile, the Department for the They have declared that they cannot even Environment, Food and Rural Affairs says approve industry codes, which is in fact far it will “keep under review” whether Ofwat more transparent than the gas and electricshould have powers to prevent inappropriate ity regulator has been. marketing activities, as the market evolves.
WHOLESALER PROFILE THAMES WATER
Who do you believe owns the customer – wholesaler or retailer? There is no longer an exclusive relationship with the customer. The retailer will need to be the primary contact for nonemergency contact and billing, and the wholesaler continues to provide water and wastewater services in the same way they did before market opening. We feel very strongly about the fact that we still have an essential service to provide to all our customers in the Thames Water region.
MARKET BRIEFING
Sarah McMath Managing director of wholesale water
Market opening – challenge or opportunity? Both. It’s been hard work to get everything in place for market opening. Not just within our company, but working together across the industry and with MOSL on CMOS system development, Ofwat on the regulatory framework and Defra on the legislative side. The main opportunities will be for retailers and customers, but it will be interesting to see what requests retailers make to wholesalers on behalf of their customers as the market develops.
What is your promise to retailers? We are totally committed to supporting the non-household market and customers. This means providing high-quality, cost-effective and responsive wholesale services to all licenced retailers, fully supporting the market operator, and seeking to ensure there is a level playing field for all market participants. We aim to work successfully with all retailers, in ensuring quality, timely and effective delivery of services to non-household customers.
Do you believe wholesale tariffs should be negotiable? As a monopoly supplier, we are required to provide services on a nondiscriminatory basis and in compliance with Ofwat’s wholesale charging rules – published 24 November 2016 – which set out the framework under which wholesale tariffs are set. On this basis, wholesale tariffs are not negotiable under the current regulatory framework and we believe this is the correct approach.
To what extent do the retailers differ in their approach to and working relationship with wholesalers? We will provide the same level of service to all retailers and their customers regardless of the working relationships. What is your view on the numbers of retailers operating in the market? There are 20 Ofwat licenced retailers, according to the Open Water website, and we have signed contracts with 16 of them so far to operate in our area.
water.Retail utility-week.co.uk/retail / UtilityWeek Intelligence
4 What is your promise to customers? We promise to help them reduce the amount of water they are using while providing a competitive price. Who are your top three competitors? I have no idea – yet. I’m really not sure how competitive some of the retailers are going to be.
MARKET PROFILE
The Water Retail Company Lord Rupert Redesdale, CEO Company aims: • Gain 20 business customers in the first year • Recruit five to 10 more staff • Secure £30 million of turnover in its first year, £100 million in year two, £200 million in year three
USP
If you were CEO of Ofwat for a day, what would you do? I would start concentrating on the fact that we won’t have enough water in 10 or 15 years’ time. I know [Ofwat chief executive] Cathryn Ross is looking at that at the moment, but I would see drought or flood, which are two sides of the same coin, as being the norm in a few years’ time. Climate change is going to change how we view water in this country. In the past, I did everything I could to turn Ofwat into an environmental, rather than just a fiscal, regulator. It has really got to take the fact that we might not have enough water seriously. What are your views on the number of retailers that are operating in the market at present? I think they will increase. I thought there were going to be vast
MARKETPLACE 14.04.2017
numbers of retailers, but I don’t think there are now, for two reasons: the process is reasonably complex and you have to understand the water market; and, with the below-5 per cent margin, is it a marketplace that is going to be attractive to a lot of people? I’m really not sure. We might see consolidation down to, say, a big six. It’s all to do with scale – the only way you can mitigate the risk of bad debt is scale. You’ll get niche players, but I actually think you’re going to get a lot more exits from the marketplace, and you’ll end up with a small number of very large operators. The question is, does that constitute successful competition? To what extent do wholesalers differ in their approach to and working relationship with retailers? We’ve found nothing but positive things about the wholesalers when we signed up with them. We thought they were going to be difficult, but I think they’re looking to be very easy, especially with new entrants. The really difficult relationships are going to be between the wholesalers and their new retail arms. The wholesalers don’t want to end up in court for being anti-competitive.
we ask three key individuals within the company what makes their business stand out from its competitors
LORD REDESDALE, CHIEF EXECUTIVE What we are offering is a service based purely on helping the customer reduce their bills through water efficiency. The basis of that is environmentalism, but it’s also fast-tracking to where the market is going to be anyway. Wouldn’t it be great if we had a marketplace based on retailers actively seeking to reduce their customers’ bills because they know that is where the competition element in the market resides?
Connecting wholesalers, retailers, brokers and customers
JACOB TOMPKINS, CHIEF TECHNOLOGY OFFICER Our approach is very straightforward. No complicated contracts, no spend-to-save options, no fancy websites. We simply offer a wholesale charge plus percentage model and as part of that we do water efficiency and implement technology for free. Our aim is to keep our costto-serve low, to offer competitive prices and to develop a close relationship with each customer and to work with them using state of the art technology to reduce water use, surface run-off and sewer discharges. EDITORIAL STAFF Content director Ellen Bennett [email protected] News editor Lois Vallely [email protected] Production controller Sharon Miller [email protected] Publisher Amanda Barnes
And because we are deliberately keeping our customer numbers low and expanding slowly we have the best staff-tocustomer ratio in the business, which means we will have time to talk to all our customers regularly and to tailor our service to their needs.
EMILY WORTHING, KEY ACCOUNT MANAGER
The distinct nature of our offering is based on two points – our approach to customer service and our focus on water efficiency. We have designed our customer policy around the concept of proactive customer SUBSCRIPTIONS/REPRINTS [email protected]
020 8955 7045 Subscription rates 12-month subscription: £507 Discounted 24-month subscription: on request
contact, meaning that our clients will interact more with our team compared with previous experience. This means that we can ensure that our customers are happy with our service and deal with issues promptly and directly. The second element that makes us unique is our commitment to water efficiency. Our team is passionate about water saving and protecting the environment so our efficiency offering is comprehensive and included in the unit rate on every contract, enabling our customers to make significant savings while reducing their environmental footprint.
For subscription and sales enquiries, including details of our group and enterprise discounts, contact: Peter Bissell, content sales manager, water.Retail [email protected] 01342 332057 Published by: Faversham House
