Customers saved £10m in second year of business retail water market

Urgent action is needed to resolve frictions in the business retail water market, Ofwat has claimed.

In its assessment of the second year since the opening of the market, the regulator said that while customers had saved £10 million during the period, more work was needed to unlock better outcomes for them.

Frictions such as poor aggregate wholesaler performance, low quality customer and consumption data, and some inefficient wholesaler-retailer interactions are undermining the overall effectiveness of the market and its ability to deliver improved customer outcomes, Ofwat said. The findings echoed comments made in Utility Weeks’s roundtable with CGI earlier this year.

Alongside its assessment of the second year of the market, Ofwat also announced changes to the Retail Exit Code.  These will see lower-usage customers receive retained price protections from April 2020. Higher-usage customers will see price protections retained but relaxed as Ofwat views them as more engaged and more able to benefit from the market. In addition, Ofwat has taken steps to strengthen protection for customers against non-voluntary changes in their non-price terms. It intends to revisit the price protections in two to three years.

Ofwat’s State of the Market 2018-19 also gives a summary of market developments over the year, showing the three new entrants to the market took around a third of switched supply points, mainly at the expense of former incumbent retailers.

Self-supply has continued to grow as a business model, with five new self-supply retailers granted a licence during the period.

The report showed that during the second year, customer awareness of and activity in the market was broadly unchanged. Just over half (53 per cent) of customers were aware of the possibility to choose their retailer (48 per cent last year). Meanwhile, around 13 per cent of the eligible customers in England have been active in the market since it opened in April 2017 (10 per cent last year).

The findings show the majority of customers were satisfied with their retailer (80 per cent reporting either ‘very’ or ‘fairly’ satisfied). But around 5 per cent (equating to around 60,000 business customers) reported being ‘very dissatisfied’. Three fifths of dissatisfied customers cited billing issues, such as not receiving bills or receiving incorrect charges, as a reason for dissatisfaction.

Complaint levels remained much higher than before market opening, with a quadrupling of complaints to the Consumer Council for Water (CCWater). The majority of these concerned billing and charges. Today, CCWater issued its own wake-up call to the sector, saying there was evidence of complacency.

Ofwat’s senior director markets and enforcement, Emma Kelso said: “Resolving the market frictions is vital to maintain the momentum of the business retail market and to get it to deliver better outcomes for customers; but it will require all market participants to step up and work collaboratively.

“Our decisions reflect the fact that the market is still developing. We want to see more customers benefitting from an effective and vigorous business retail market but we also want to ensure those businesses that for now are less able to engage, are not exploited.

“Despite some good progress from some of the industry players, the sector needs to take urgent action to resolve market frictions swiftly in the third year of operation.”