Don’t kick the can down the road on smart water metering

The need for managing water demand in the non-household sector has shot up the agenda but there are concerns it still remains a lower priority than domestic consumption for water companies. Trisha McAuley, chair of the Strategic Panel for the Business Retail Water Market in England, argues that prioritising smart metering for non-domestic water customers is key to unlocking a more efficient market.

To work through challenges that have dogged the water retail market since opening, an independent strategic panel was formed with representatives from across the sector. It is chaired by Trisha McAuley – who also sits on the boards of multiple consumer and energy organisations and steering groups including at National Grid, SSEN, and formerly Ofgem and NI Water.

She talks to Utility Week about why smart metering must be prioritised now for business customers.

With a steep rise in numbers of data centres, which need water for cooling systems, and the potential for green hydrogen to be produced at scale, demands on water are set to rise and scarcity for homes and businesses will be an ever more pressing issue. What’s more, as the government pushes its economic growth agenda and wants to increase our domestic food production for security of supply, we will see even further demand on water supplies

With this in mind, McAuley says it’s crucial non-household demand management is prioritised now, before it becomes a burning platform.

Ofwat has told the sector to set ambitious targets for lowering consumption by business customers, which account for around one-third of annual usage. With just two months to go until business plans for 2025-30 are published, McAuley’s Strategic Panel wants to see a radical step up in metering.

“One of the problems in this market is the lack of national system of smart metering,” McAuley explains. “People don’t understand how much water they consume or have the information to make those choices.”

The panel is pushing for all companies to roll out smart meters as standard, and for installations to be done concurrently at homes and business premises. “It doesn’t make sense not to do that,” McAuley believes. “If companies are not planning large-scale rollout, then we want water companies to prioritise the highest consumers of water.”

She explains the panel is understanding about why water resources management plans (WRMPs) focused heavily on household customers.

“It’s concerning but historically private households have been prioritised,” McAuley says. “The potential for financial penalties if things go wrong can be really high but we were disappointed at the lack of reference to the non-household market because it uses a third of our water. It’s also significant for water companies from a leakage reduction and water balance perspective too.”

The Strategic Panel was formed last year independently of market operator MOSL, comprising nominated retailer and wholesaler members, independent members, a customer representative and representatives from MOSL, Ofwat and Defra.

They oversee performance in the market, which includes assessing how directions set by Ofwat and Defra should be put into practice, and making recommendations and reviews of market codes.

Recognising the pressures the wider sector is under to act on environmental challenges, McAuley adds: “Our message is we can’t kick this issue down the road just because there are other pressures.”

The panel argues there is a clear business case for wholesalers to work more effectively with retailers to ensure not only that water efficiency offerings can be developed for customers, but that the money “stacks up” for water efficiency schemes to be developed. McAuley says the panel has had positive engagement with wholesalers to take on its feedback.

Many noted that without Defra’s 9% reduction target for NHH being confirmed, they had not been as ambitious or specific as they intend to be in their final plans.

Looking to PR24, the panel was encouraged by the new incentive specifically for demand reduction in the non-household sector. Previously, consumption reduction targets were calculated by per capita consumption (PCC). This time there is a political motivation after Defra set a target of 9% non-household reduction by 2038.

A blocker to actually achieving that target, McAuley suggests, is getting financial incentives flowing between wholesalers and retailers.

“Wholesalers can be funded through the performance commitment but the retailers are the face-to-face contact with customers,” she explains. “So that money needs to flow between wholesalers and retailers to put incentives in place.”

At the moment, she says that is not happening.

“We want to encourage and enable retailers and wholesalers to collaborate in that space,” she adds.

She says there is a clear willingness by the market to improve in this space. “Wholesalers and retailers are working together very well. It’s just about getting the money flowing.”

Ensuring money is in the right place to effect changes is is one of the Panel’s market priorities.

Furthermore, McAuley says, basics around data and getting meters read continue to require attention, ensuring customers have up-to-date accurate information about their consumption from their meter.

She says the non-household sector is “nowhere near” having accurate up-to-date information for retailers and customers to properly understand how much water is being used but believes the smart meter rollout will change this, coupled with incentives as part reform work to the market is currently structured.

“There’s no incentives for customers, if they don’t know how much they use how they can possibly change?”

Another issue the panel identified was regional differences in what customers are offered. Despite the perceived benefits of opening up the market, with retailers able to serve nationwide customers, wholesaler differences exist.

“You don’t have consistency on tariffs and water efficiency approaches,” she says. “That causes problems for retailers and customers. Obviously water companies can look after their customers with regionalisation, but there’s got to be some way of getting common standards between them.”

For a retailer or a business operating across the whole country, getting consistent data and information is crucial to implementing water efficiency programmes – at the heart of which, you need smart metering. With different tariffs available regionally through wholesalers, McAuley stresses that customers may see inconsistencies.

Developing these common standards and data interoperability are within the remit of the strategy the panel is exploring, she says.

The panel is therefore working with MOSL to to examine the Market Performance Framework in parallel to developing a roadmap for getting to a flourishing market – the latter was remitted to the group by Ofwat and Defra with a publication date of this autumn.

“We see the pressure companies are under,” McAuley says, “But the longer it takes to install smart meters, the harder it is to guarantee water in customers’ taps. Delaying by for five or ten years, will just mean running to catch up.”