Doubts cast over success of water market opening

The programme for retail market opening is under threat and the water sector must “act urgently” to ensure major issues, which could jeopardise its success, are addressed.

The timetable to the planned market opening date is “exacting in the extreme”, an independent group, set up by Ofwat to review the programme, has warned. It said “a number of major tasks still lie ahead”, and that the efforts of a large number of participants must be “marshalled and coordinated”.

In its second review of retail market opening, produced for Ofwat at the end of April but published today (28 July), the team said despite the efforts and progress of those involved in the programme, “a number of uncertainties” remain.

It moved the programme to ‘amber/red’ status, but said “stakeholders appear well aware of the level of challenge they face and are preparing seriously to address it”.

“The focus on the delivery of the central systems has dominated the programme for much of its life; it continues to be demanding but attention is now moving to the readiness of market participants,” the team said.

“There is still much to be done in this area. The timetable has little if any flexibility to accommodate delay or disruption or lack of clarity in any of these areas and there is no contingency plan. These are areas of major programme risk.”

It added that overall issues of governance and structure are “not of such concern as previously”, and that “budgetary control has been established”.

The work by the review team included interviews with water companies and key industry stakeholders. It said “a number of interviewees had continued to express concerns that the market may not succeed”.

Ofwat director for market opening Adam Cooper wrote to the group in response to the report, to provide assurance that the programme is on track, and to outline what has been done to address the issues and uncertainties.

At the time the review was conducted, he said, Market Operator Services Limited (MOSL) had moved to a ‘red’ status in terms of its delivery of the first drop of the central systems, and had mobilised additional resources and management actions to address the issue.

Since the review MOSL, the group set up to deliver the operational capability needed to support the efficient operation of the new market, has announced it has moved back to an ‘amber’ status, after taking the “appropriate actions and activities”.