Everflow CEO: Ofwat hasn’t given competition a chance

Applying a simplicity first approach, Josh Gill has grown Everflow in the water retail space, added waste management services to the company’s offering and is eyeing up telecoms and energy next. He talks to Utility Week about the need for his peers to stop blaming market frictions for their own failures and for Ofwat to overcome its fear of market forces.

Josh Gill is sick of hearing about “friction points”.

Ever since the non-domestic market opened to competition in 2017 this has been the sector’s catchphrase, with lack of progress being put down to an assortment of blockers that existed from day one. These include lack of engagement, complicated bilateral processes , poor quality data, unread water meters and low margins.

However, the Everflow founder and chief executive tells Utility Week the water retail sector has a habit of overcomplicating things and should focus on surmounting these obstacles rather than using them as “an excuse for poor performance”.

“You’ve just got to overcome them,” he says. “People should stop talking about frictions as barriers to things happening and just get on and fix them one-by-one.”

As an example, Gill points to the perceived lack of engagement with the open market. Ofwat fears SME customers are not engaging but this does not tally with Everflow’s experience.

“There isn’t any lack of appetite from smaller businesses, other than where the savings just aren’t enough,” he says.

However, he does worry about the impact of the price cap, which Ofwat raised in April in a bid to stimulate the market.

“We’d have preferred Ofwat to allow competition to control prices rather than regulation,” he says.

The regulator stepped in to raise the price cap applied to customers who have not engaged with the market because it was deemed that competition was not working for the smaller end of the market, which 85% of customers fall into.

“From Ofwat’s perspective, they said there was little engagement, so regulation should be used a form of control,” Gill says, “We’d come from the opposite point of view and say there is little engagement because you’re using regulation as a form of control. The market was designed to be open to competition but Ofwat hasn’t given competition a chance in this section of the market. It’s disappointing to see this risk averse stance.”

Gill fears the market will never have evidence to release competition unless Ofwat shows more faith. “That will be the only evidence that proves it but if they’re never going to take away the regulation then we will never get to that point.”

Untapped potential in water efficiency 

Looking towards the upcoming price review, Gill suggests that Ofwat has not given enough consideration to the non-household sector.

“There was an expectation from Ofwat that retailers would have been able to make money from water efficiency services, but that’s just not the case.” He says margins currently are so slim that returns are not possible from the vast majority of customers.”

Ofwat has highlighted the importance of the non-household sector in demand reduction but Gill says retailers must be incentivised in the same way as wholesalers for domestic customers. “Otherwise we’re just not going to get the job done.”

“If we’re really serious about water efficiency as a country – which given the shortages especially in the south east, we have to be – we need to be incentivising it.”

He believes retailers would happily introduce measures, even without profit, as long as the costs are covered to the point of customers being willing to take it up. “Someone needs to pay for it, and it’s clear that customers aren’t willing to.”

Everflow customers are charged a fixed fee, then wholesale usage rates are applied, which Gill explains makes it in both Everflow’s and its customers’ interest to use water efficiently.

“We structured it this way so we could genuinely act as a customer advocate when dealing with water efficiency. The challenge we face with SMEs is there’s only a small subset of customers that are proactive about water efficiency and likely to engage,” Gill says. The company is working with wholesalers to find novel ways to help customers achieve greater water efficiency in the market.

Making utilities simple

Last year, the company grew its share of the water market to 5.35% with a 28% rise in customer numbers. It now serves 79,000 supply points and expects to be at 100,000 customers by September. 

Despite the difficult economic backdrop, Everflow managed to increase revenue by 47.2% in 2022, to £116.2 million, with EBITDA of £1.824 million.

The group has increased its staff by 50% over recent years and moved into a new headquarters, with space to double its staff headcount. This follows the addition of waste services to the Everflow portfolio last year with plans to add telecoms and, after 2025, energy.

“The utility proposition is fundamental to our strategy,” Gill explains. “Our research tells us customers want simplicity across the board and don’t feel like they’re getting that from all areas of their utilities.”

The move into waste was spurred by the similarities Gill recognised between that market and water retail at time of market opening. “There’s traditionally very poor customer service, traditionally very little technology used in the sector to help service customers,” Gill explains.

After six months in the market, he says Everflow has nailed its proposition and is starting to see results from applying its approach of simplicity. As numbers grow, the company is able to pass along savings to customers in the same model the company uses in water retail.

Gill anticipates customer numbers won’t match its water business, but there has been significant interest from existing Everflow customers. “Quite a lot tell us if we can replicate what we’re doing with water for waste then they want to hear more about it.”

He anticipates the new division breaking even by the end of the year. It will not be the newest part of the group for long as a pivot into telecoms is on the cards, which Gills explains will coincide with nationwide switch from copper analogue telephone networks to fibre connections.

“Timing is critical, we want to be hitting customers with the message that we can offer telecom at the same time as they’re also being engaged by their current providers being told you can’t renew their copper line contracts anymore. It’s a good time to be engaging with our customer base with a message that we could consolidate all their utilities with us as one provider.”

The company’s mission is to target the SME space, where it has found its niche as a water retailer.

And the game plan will stay the same. As Gill sums it up: “Our mission is to make utilities a simple recipe.”