Domestic competition for water: industry reaction

The Chancellor’s shock announcement that the Treasury could open up retail competition in the domestic water market has been met with positive reaction from industry leaders.

In a document published this morning, the Treasury says it is “driving water market competition” and could introduce competition into the domestic market as early as 2020.

“Building on opening up the non-household retail market to competition, the government wants to extend choice to households,” it adds.

Details are few and far between, but the announcement comes as part of a broader package of reforms to “boost competition” in a number of sectors in England – including water, banking and telecoms – to get a better deal for consumers.

Ofwat will conduct an in-depth review into the costs and benefits of extending retail competition to household water customers and will release its assessment by summer 2016.

The announcement will come as a surprise to companies, which have been focused on opening the market to competition for non-domestic customers in 2017, and were not expecting domestic competition to follow so swiftly.

However, industry reaction has been tentatively positive, with water firms and stakeholders saying they will work with the government, the regulator and customers to “assess the potential” for competition in the domestic market.

The Department of Energy and Climate Change (Defra) insists that it is not accurate to say the government is aiming for 2020. But the Treasury seems set on the move, insisting that, following the review and assessment, “the government will work with water companies to begin the transition to household retail competition before the end of this Parliament”.

Here’s how the water industry reacted to the news that competition could be introduced into the domestic retail market in England:

Cathryn Ross, chief executive, Ofwat

“Customers’ priorities should be at the heart of water services. Well-functioning markets deliver benefits for customers, as well as wider society. Such a market in the water and wastewater sector could see customers become more engaged, push prices down, service up, and encourage more efficient use of an increasingly stretched resource.

“Opening up choice is a decision for government. We welcome the opportunity to report on whether the benefits of choice could or should be extended to households. An in-depth review is needed to understand the full extent of these benefits, as well as identifying the barriers to getting a better deal for customers and making sure all customers’ interests are considered. We look forward to engaging with our stakeholders as we carry out the review.”

The Department for Environment, Food and Rural Affairs

“We are committed to building a resilient water industry that is built around fairness, transparency and affordability. We are on track to open up competition in the water market from April 2017, giving businesses charities and public sector bodies the opportunity to choose their supplier for the first time and bringing £200 million to the nation’s economy. Today’s announcement builds on the good progress already made by exploring the potential to extend choice to more customers.”

Rob Wesley, head of policy, Water UK

“Water companies are already working with all the sector stakeholders to deliver a choice of water supplier for all business, public sector and charity customers in England from April 2017. We look forward to hearing more about the government’s plans for this to be potentially extended to household customers in England in the future.”

Tony Smith, chief executive, the Consumer Council for Water

“In research we did some years ago the majority of household customers supported the principle of competition in water and sewerage services. However, when Ofwat conducts its cost-benefits review it will need to look carefully into the reasons why a sizeable minority of household customers, at that time, were less enthusiastic, and how this might be overcome. CCWater will work to make sure that customers’ views, as well as the cost-benefits case, shape the government’s decision on whether it will give household customers a choice of water and sewerage provider.”

Ben Jeffs, chief executive, Market Operator Services Limited

“We welcome the clarity of direction that this announcement brings and believe it should have a positive impact on preparations for the opening of the non-household market in April 2017.

“Subject to the outcome of the review, we would work closely with Defra and Ofwat to understand any impact household competition may potentially have on our systems or the general market arrangements. Our focus remains firmly set on April 2017 and delivering the plans we have in place.”

Johanna Dow, chief executive, Business Stream

“From our experience we know customers generally prefer choice and in principle we would support the creation of competitive markets, provided customer safeguards are put in place. However, our focus is firmly on seeing that the non-domestic market is a success first. While good progress is being made, further work is required on creating a level playing field, consistency across regions, and proportionate retail margins. These issues need to be resolved, and the benefits of the market demonstrated, before other markets are opened.”

Peter Simpson, chief executive, Anglian Water

“We welcome competition in the water industry and are well advanced with our preparations for the introduction of competition in the non-household market in April 2017. We now look forward to working in full cooperation with the government, the wider industry and our customers to assess the potential for competition in the domestic market.”

Welsh Water spokesperson

“We are currently reviewing the details of the UK government’s announcement which means that householders in England could from 2020 be given more choice over which company supplies part of their water services. As water is devolved to the National Assembly for Wales, this announcement does not apply directly to us at this stage. However, we will be monitoring developments closely. As a water company without shareholders, our sole purpose is always to provide the best possible value for money for all our customers.”

Severn Trent Water spokesperson

“At Severn Trent we’re committed to actively engaging in reform of the sector, in particular regarding how and where further competition can be effectively promoted to the sustainable benefit of customers, and we welcome the opportunity to assist Ofwat in its analysis.”

Southern Water spokesperson

“We are committed to working alongside the government, Ofwat and local authorities to ensure the best possible deal for our customers and look forward to the results of Ofwat’s assessment.”

South West Water spokesperson

“We note today’s announcement with interest and continue to welcome discussion on how market reform can help create a more innovative and sustainable water sector.”

Affinity Water spokesperson

“We have been working closely with our stakeholders and regulators to prepare for non household market reform in April 2017, which will allow businesses to choose their water supplier. We will continue to work closely with Ofwat as they carry out a review on the feasibility to extend retail competition to household customers.”