Domestic water market ‘up and running by 2022’ prediction

The opening of a competitive domestic water market will occur within the next three years, customer communication company Quadient has predicted.

“Water needs to learn from the lessons of other utilities,” warned Mustafa Atik, energy and utilities expert at Quadient.

He said: “The big four energy suppliers have seen their business drop, partly because they weren’t ready for the explosion of consumer power that opening the industry created: from customers demanding energy from renewable sources, to becoming more savvy about switching suppliers; to using services from new entrants such as IKEA. These are all likely to be repeated for open water.

“The business rollout has acted as a proving ground, the consumer implementation will need to operate at a much larger scale, with a far greater potential for confused, upset and volatile customers. Whether an established provider looking to fight off the competition, or a new entrant looking to make a name for themselves, companies will only thrive in the open water era if they treat the customer as king.”

Dr Mike Keil, head of policy and research at the Consumer Council for Water (CCWater), is less certain of the inevitability of a domestic market. Responding to the prediction he said: “Our research shows that domestic water competition would fall well short of delivering the savings that many households expect and that has dampened people’s enthusiasm for choice. These concerns have been reflected in the non-household market, which has failed to engage the vast majority of small businesses and been undermined by rising complaints.

“Until these problems are addressed, there is unlikely to be a clamour for households to be given the same choice.”

Last month, CCWater published a report that found that levels of satisfaction and trust among non-domestic water customers were continuing to fall.

Aquaflow recently became the first company to exit the market after it went into liquidation.

Responding to the prediction for a competitive domestic water market, a spokesperson for Ofwat said: “It is for the government to decide whether and how to introduce competition in the residential retail water market. We were asked by government in 2015 to conduct an assessment of the costs and benefits of extending competition to the residential retail water market and we published our findings in July 2016.”

Ofwat’s findings indicated that there were no guarantees of how successful residential competition would be, but it suggested that a net positive outcome was more likely than not. The regulator modelled four scenarios to illustrate the next 30 years, three of which estimated a net benefit for customers, and the worst situation a net cost of £3 per customer per year.

According to Ofwat, the very best scenario for consumers would see them gain a net benefit of £8 per year if the market lowered costs, considerably enhanced innovation, and had strong competition.

Responding to a CEO insight survey for Utility Week last year, water sector leaders were lukewarm about the prospect of extending competition to domestic customers. Some described it as a “significant cost versus an ambiguous opportunity” involved and others suggested it would have little impact.