Last reviewed 4 July 2017
A new competitive market for water opened its doors for business on 1 April this year. A reduction in price per cubic metre was at the top of most people’s wish list, but with the margins between wholesale and retail prices slim, the savings are unlikely to be as high as hoped. Laura King takes a look at how the new market can instead make water efficiency the top saver.
On 1 April 2017, the world’s largest competitive water market was launched. The change means that most non-household users of water are able to switch to a water services retailer of their choice. That is to say, they can choose who bills them, who reads their meter and who they deal with on a day-to-day basis regarding water-related services. Local water companies continue to provide the infrastructure and supply and treat the water (they become “wholesale” service providers) but there is no longer an obligation to use their billing services.
This separation of wholesale and retail services brings the water industry into line with other industries such as the energy and telecoms industries. Much like these industries, it is hoped that by creating a competitive market, businesses will be able to get a better deal. Indeed it is estimated that the change will benefit customers to the tune of £200 million.
Who is eligible?
The Government has estimated that about 1.2 million customers are eligible to choose their retail provider. According to Open Water, eligibility depends on the primary use of the premises and where the existing water and waste water supplier is based. The Open Water website offers advice about the deregulated water industry and offers a free “eligibility guide” for people to find out whether their organisation qualifies.
The new market is currently only operational in England. Scotland has had a competitive market since 2008 and Wales has opted out of extending the new market into the country, so most premises in Wales will not qualify. There is no change to premises in Northern Ireland.
What can businesses switching services expect?
Before the opening of the market, a survey by the Major Energy Users’ Council indicated that one of the main benefits organisations would be looking for in any switch would be cheaper prices for their water. Although it is possible there will be some cost savings, they will not be as large as those experienced when the energy market was deregulated, or even those seen in Scotland in 2008. The reason for this is that wholesale prices in the water industry are heavily regulated, and in England the margin between the wholesale and retail price is relatively small. Furthermore, as the wholesale costs make up around 90% of the bill, there is not much room for cost savings. Indeed, some industry experts have suggested that cost savings made through lower water prices can be as low as 1%.
So, how can customers benefit from the new market?
If costs cannot be saved through water prices, the next place to look will be savings through water efficiency and improved administration. The good news is that many retail providers will be looking to differentiate themselves by providing additional services to help organisations save time and money through easier processes and tools to help reduce water consumption.
Most organisations will have an energy management programme — saving energy is a relatively mature market. With regards to monitoring and measuring consumption, water is still something of a poor relation, and although water efficiencies are talked about, comprehensive water efficiency programmes are much less commonplace.
The new market provides an excellent opportunity to change this thinking around water and many water retailers will be offering services that will help kick-start better water management including:
better engagement and customer service
choice around billing — especially the ability to offer consolidated bills
choice around how meters are read
tailored services and innovation
advice and guidance on improving water efficiency.
What should you be looking for?
The first thing to look for will be a retail provider that offers a good level of service and innovation. Service providers are going to be looking beyond cost to find ways to engage you, so use this to your advantage.
What is your water management strategy?
Have a clear idea of what you want to achieve — be this water reduction or better monitoring and data collection. Use this to decide on where you take your business as most good retailers will be looking for ways to help you meet your aims through providing tools and services that help you meet your targets.
Opportunity to get better data
By dealing with one provider an organisation has the opportunity to streamline processes — especially in situations where an organisation is dealing with multiple sites or providers. The new market now means that customers can have a single source of data and a single point of contact.
Furthermore, there should also be more control over the data through services such as real time viewing and better ways of monitoring and measuring usage.
Better data collection through consolidated bills and more control on how water use is measured should help you get better information on your consumption. And everyone knows, the ability to collect reliable data is a crucial step in being able to manage resources smarter and more efficiently.
Are there any risks?
The new water market uses a centralised database (the central market operating system (CMOS)). The first step will be to verify the data on this system as there is a chance that it could be wrong. To do this, an organisation will need to collate its own water data, site lists and know what is in its portfolio. Doing this should make the switch easier and will also help provide the baseline data needed if you are to embark on a more ambitious water-saving programme.
Steps to smarter water management
If you consider water management in the same way as energy management there are several key steps that are generally followed in any management programme:
creating a management plan and strategy
map use across sites
record use and collect data on consumption and cost
review where savings can be made and put plans in place to reduce use
measure and monitor results of actions
report back and review.
As discussed above, a better service from a retail provider can help with several of these stages. A new contract:
can provide the impetus to develop a management strategy.
provides an opportunity for you to validate your water consumption and map water use.
will make monitoring your bills and collecting data much more efficient.
can offer advice and guidance on water efficiency measures, and help with services and innovations that can enable you to meet your goals.
The opportunity is there for the taking. Deciding what could be in it for you is the first step, followed by validating your data and contacting suppliers to see what they can offer.