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How could a greater choice of water suppliers benefit you?

water from tap

Ofwat, the regulator of the water and wastewater sector in England and Wales, has published its review of the options for developing greater competition in the household water market. How does the Ofwat report lead to a benefit for you?

So what does this mean? Could we end up with five different taps in our sinks, or even one that provides sparkling water? Well, no, this is strictly about retail competition, ie, which company you pay your household water bill to and what extra services it could provide.

Ofwat and the government recognise there is largely a natural monopoly in water networks (the pipes that get water to you), so you needn’t worry that your streets are about to be dug up to lay different water suppliers’ pipes either.

Our response to the Ofwat report

Ofwat’s findings were mixed and, in some cases, unfairly ridiculed, in my opinion.

The first question most of us want to know is: ‘How much can I save on my water bill?’ Well, Ofwat’s analysis points towards a top-end saving of £8.

While this is rather modest, Ofwat has suggested that opening up the water market to greater competition would drive innovation and new ideas. And in my view, that’s where you’d see the most benefit.

What if one company could provide you with water, gas and electricity, so you’d only have to make one phone call to sort all your bills? How about an app to help you manage your account? Currently, only two of the monopoly water companies offer their customers an app, as Ofwat’s CEO Cathryn Ross pointed out on BBC Radio 4’s Today programme.

And as the latest figures from the Consumer Council for Water, which were published on Wednesday, show that complaints to water companies are on the increase, could a competitive market lead water companies to focus more on their customer service?

While water competition on its own doesn’t sound like an attractive deal for consumers, when you start to think about the new innovations, I wonder if it becomes more so?

Role of government

Ofwat has presented its report to the government, which must now look at it and make a decision as to whether it is worth developing greater competition in household water and wastewater services. This would put it in line with non-household customers who are due to get the choice of water suppliers from April 2017.

When the government makes its decision, it should weigh up the overall costs to customers and assess the overall outcomes for customers against those.

What do you think – would competition in the water sector make a splash, or sink like a stone?

Comments
Guest
M J Davis says:
25 September 2016

My water company has admitted that their IT system is not fit for purpose and they have difficulty when I change bank accounts. This is because they have no competition. All shares in the company are owned by a pension fund in California. The regulator is far too soft and the profits are big and secure. The companies should be publicly owned not for profit organisation.

Guest

That M J Davis is a major point English water is owned by foreigners . While some may say the US arent foreigners thats how they view us. In any case you have only to look at Scotland for an entirely different political / social,policy . Scottish Water operates under the -Water Services ( Scotland ) Act – 2005 and the Water Industry Commission for Scotland . It was founded in 2002 by an Act of the Scottish Parliament — because 100 % of it is owned by the Scottish Government it is considered a statutory corporation . Emotions ran high in Scotland as to the ownership of water it is such a life giving , vital thing that the Scots were “up in arms ” at foreigners owning their water . As M J Davis says — the companies should be publically owned , I agree , why should political dogma stop the English public owning its own water ?

Guest

I have no territorial concerns about the temporary ownership of our water; it all comes from rain that falls over England . I also have no objections to our sewage being in the hands of foreigners – in fact, I recommend it.

Guest

This raises some interesting possibilities. As in energy, there is no reason why our water should not be bought, marketed and sold by companies that have no experience of treating and supplying water and disposing of waste water; they would leave all that difficult stuff to the existing water companies who could even come out of the customer supply business altogether and concentrate on the production, distribution and disposal side. Residents could have a choice of Tesco Water, Waitrose Water, or Amazon Water, etc. The product would be the same but the customer service would differ. Competitive pricing would depend on which water supply companies could amass a sufficient customer base to enable them to procure the greatest volume of water at the lowest price from the water producers.

One drawback is that there is not a national water network and there are big differences in the storage and distribution costs across the regions so it would be difficult for the supply companies to spread the economies of scale or the benefits of greater volumes of water from one part of the country to another. With electricity, for example, a company focussing on green energy can feed in any amount of its green electricity at one end of the UK [Scotland, perhaps] knowing that an equivalent wattage of electricity can be consumed anywhere else in the UK. This would not be possible with the present water networks and all feed-ins in one region would have to be matched by an equivalent consumption within the same region. That is not as efficient and could inhibit competition.

And who would decide on hosepipe bans? And what effect would they have on the economics of the supply companies? At present, with vertically integrated production, distribution and disposal operations, any loss of supply volumes due to water restrictions are contained within the overall cost profiles spread across very large regions.

There are at the moment a number of independent water supply companies operating in various towns or geographical areas with protected monopolies. They don’t generally deal with waste water which is the responsibility of the regional water company. However, I could foresee such local companies being wiped out by the new ‘national’ water supply companies. There would need to be some controls built in to ensure that residents in those areas were not left high-&-dry in the event that the local companies lost so many customers that they could not carry on trading. It would be necessary to ensure that another production company was able to take over their reservoirs, treatment plant and water mains in order to maintain continuity of supply.

I think the costs of marketing water, managing switching, and the usual salami-slicing of tariffs and bundles, would add costs into the equation that are not there at the moment.

Sometimes things are best left undisturbed.

Guest

From the Which? Press Office 19 Sept.
“Alex Neill, Which? Director of Policy and Campaigns, said:

“Giving people a choice over who supplies their water could lead to a better experience for consumers but any plan to open up the water market must learn the lessons of other utility markets. The Government should now consider whether a competitive water market would deliver better outcomes for customers.”

I have some difficulty understanding how real competition could develop without a national grid of water supply, let alone water treatment. With electricity we have a national network of supply wires, into which anyone can feed a supply, either directly or through an existing generator. But how would it work for water?

Given the apparent stickiness of consumers in not taking advantage of better energy deals, just how much effort are they going to make on their much lower water bills?

A “better experience for the consumer” sounds just like those vacuous marketing ploys; just what does it mean? If we mean cheaper bills, and explain how, then lets say so. Otherwise…..?

Guest

If you are a one person or two person family the answer is change to a water meter. I am with Welsh Water/Dwr Cymru and I changed along with a few neighbours about 5 months ago, my water bill has reduced from £60 per month [standard payment] to £40 per month and has now further reduced to £25 per month and that is standard everyday use. the installation of the new water meter was free. Got to be a consideration if there is just a few of you at home.

Guest

Excellent comments from John Ward, perhaps he should replace OFWAT as he seems to talk more sense.
However, I don’t quite agree with the view of leaving the current status quo as is. The electricity/gas market is not a panacea and lack of engagement of the masses to switch does not help. Even so, the water industry is falling behind expectations today, and the fact so many water companies are owned by non-UK entities shows there is money in water.
There is a lot to sort out and ideally a national water network would be an outcome. A modern society should have the means to distribute life sustaining water from where it is plentiful to where it is most needed. After all there are plenty of ancient civilisations that managed it.

Guest

So lets get this straight – you are all against a national . government controlled water supply ? You are quite happy foreign countries and in some cases ( France ) owning parts of British Utilities ? But you are unhappy that Water has not been universally sold off in Britain –those dastardly Scots always “bucking the privatisation system ” . Do none of you remember that the government has already thought of that and —announced it would (in modern terms ) cost what the Trident renewal would cost—and MORE ! The logistics are enormous , it was “knocked back ” . This is interesting – I would like to hear from the 99 % of the English public if they agree with this and that I am the only one not happy with the present situation.