Crying Wolf?

The water industry thinks competition is great in its place - it calls for, and gets, fierce competition among its supply chain. But the industry has strongly resisted competition for its customers.

Water companies argued against retail competition, saying variously that retail competition would fundamentally damage the soundness of the companies, and that the retail slice is so small that there is no margin for competition. They argued against allowing new entrants to compete to build and manage large assets.
Now companies are warning over the market-based approach to abstraction and treatment, saying that it could undermine the collaborative work that has been so successful in catchment management.
Ofwat has dismissed industry fears, saying the right market framework would incentivise the right behaviours. That may be true, but the experience of the energy industry may be instructive here. That market results in least-cost solutions. So after years of Non-Fossil Fuel Obligations, Renew­ables Obligations and much else, we are still trying, with electricity market reform, to distort the market far enough to achieve our environment goals.
The water industry has fought against competition, and who can blame monopoly providers for defending any part of their business strongly? But the fear is that in drawing a series of lines in the sand, the one that really counts may get lost. We need to manage our water resources better. Is that the point where competition is not as effective as collaboration? By fighting every step of the way, the industry may be less effective where it counts.
Janet Wood

This article first appeared in Utility Week’s print edition of 16 March 2012.
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