Domestic water competition savings could be bigger than expected

Analysis suggests bundled services key to improved financial rewards

Introducing competition into the domestic water market could offer customers much bigger savings than previously suggested, if companies offer multi-utility packages.

Savings could be as high as £150 per year per household, if water is bundled with energy and broadband, according to a short analysis conducted by Economic Insight, on behalf of Southern Water.

Ofwat’s 2016 cost-benefit review suggested that customers would be able to save a maximum of £8 per year on water bills. However, Southern Water chief customer officer Simon Oates said the regulator’s figure was based on companies providing water alone, and failed to consider the benefits of multi-utility packages.

“There are economies of scale between retail services across multiple sectors. If a retailer was to bundle water, electricity and broadband, we believe, based on the analysis done on our behalf by Economic Insight, there could be a £120-£150 saving for the customer, if these cost economies were passed on,” said Oates, who commissioned the analysis.

Offering bundled deals would also bring the water sector more into line with other utility providers, for example gas and electricity, which have been supplied together since deregulation in the 1990s.

The minimal savings suggested by Ofwat mean that innovation and customer service have been spotlighted as the primary benefits of competition in the domestic market.

Government first mooted the idea of domestic competition in 2015, when it proposed the market should open by 2020.

Since then, few updates have been given on government’s thinking about the proposal, causing some commentators to speculate that the concept had been quietly dropped by the new administration.

The lack of a formal announcement from government has evoked a feeling of restlessness within the industry, with Ofwat chief executive Cathryn Ross calling for a swift decision on whether the government will proceed with plans.

Water minister Therese Coffey has insisted that the idea is “still on the government’s agenda”.