Thoughts as the English Water Market Opens up for competition…

So what has happened to date in the UK Water Market? Direct Power has been working with multiple supplies to prepare for the opening of the market since early 2016. This has been a rather frustrating and slow going process. Water retailers have had a busy year: many new entrants, many opting out of the retail market, lots of staff turnover. We will have to wait and see who the winners and losers will be in this new market, as their pricing and service record are untested in a competitive field.

 

Current situation:

The water market retailers are flat out preparing their products, pricing tools, and paperwork. As can be expected with any new market, there are going to be a lot of hurdles to overcome and progress is often slower than we would like. At the time of writing, mid-March, 2017, water retailers are not in a position to aggressively price all tenders at the present time. The common message being sent by all the water retailers is a request for patience as they put the finishing touches to their pricing tools and contract products. Many are advising not to rush the market in the early days.

Over the past month Direct Power has been receiving indicative prices for clients who proactively submitted their water bills for early review. To recap, wholesale costs are not set by the retailer. Bear in mind that the wholesale cost component of a typical bill will be around 95%, so that doesn’t leave much margin for the water retailers to offer significant discounts, if any at all. The retailer has to cover the wholesale charges, plus their cost to serve, so price savings will be limited at best.

 

So why tender your water account?

The big winners will be clients who treat this exercise more than a simple costing process. Clients with multiple sites will see significant savings in administration and billing costs by coordinating all their supplies with one retailer. Clients who actively engage in the market will be proactive when it comes to addressing water consumption and efficiency drives. Many of the retailers will be offering plans and products to help the end user reduce costs by reducing water consumption. Since there is little room to compete on price and still break even, the retailers will be motivated to compete on their service and additional offerings.

 

What does the future hold?

The expectation at present time is that the English water market will mimic the Scottish Market, and that reductions will be limited through 2020. After the first few years of minimal reductions and switching in the Scottish Market, the regulator stepped in, forcing the wholesalers to reduce their costs, which were passed through to the retailers and end customer. With wholesale costs in England already set into 2020, the hope is that we will see more competitive pricing in 2020.

 

Plan of Action:
  • If a significant savings is found in the market, Direct Power will help you to secure a contract straight away.
  • If water is a small spend for your business and you want to lower your administration burden you could opt for a 3 year deal to see you through to the next wholesale price review in 2020.
  • If you are unhappy with the service you receive from your current supplier Direct Power can facilitate a switch.
  • If you manage multiple sites, Direct Power can help you to streamline your contract so all water meters show on the same supplier and group bill. Just think of the hours you will save reconciling bills each month!
  • If you are a larger water user, and are serious about reducing your water consumption and spend, why not sign with a supplier who will be able to help you with schemes to help you improve your water efficiency.

So whilst we don’t need to panic, you do need to send your water bills and a completed OFWAT LOA to Rebecca at Direct Power so she can help you navigate these uncharted waters of the UK water market! Go to our Contact page for all of our contact details.

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OFWAT Letter of Authority