Leader: Portsmouth Water’s deal is the first – it won’t be the last

And so the first deal of the new water market has taken place, with Portsmouth Water selling its business book to Castle Water for an undisclosed sum. It’s a clear-eyed strategic decision by Portsmouth Water, a company known for its customer service, to stick to the knitting and transfer the tiny fraction of its customer base that will qualify for the new non-household market to a specialist retailer. It is also a sign of things to come.

Portsmouth has been clear on its reasons for the sale, the year-long handover process, which will limit the preparations it needs to make for market opening, and its full intention to play in the competitive domestic market (if and when that comes to be). Other water companies with similarly limited business customer bases or ambitions in that field will take note. Some of these will, like Portsmouth, be WOCs – but not necessarily all. It’s interesting that Portsmouth did not sell its customer book to its local WASC – perhaps Southern Water too sees its future in the wholesale market, at least on the business customer side.

Market observers will be eager to know the cost of a business customer, as determined by this deal, though Portsmouth and Castle have refused to disclose terms. The savings Portsmouth will realise by transferring the management of these customers to Castle, and presumably handing over a big chunk of work around customer data and investment in separate billing systems and so on, may be the more significant sum. Either way, this is the first sign that the the long-anticipated changes in company landscape will occur.

• Whether Eon’s decision to cut gas prices last week was an example of realpolitik or not, the energy supplier is to be praised for being the first to finally break ranks and respond to ever more urgent calls from the Cabinet downwards to cut prices. That its peers have been slow to follow suit, with no further announcements at the time of going to press on Tuesday, beggars belief (see p21). They would be well advised to come out with their own cuts, and quickly. Not only are the government and media watching, the CMA has delayed its provisional remedies until March. If the market can be shown to be functioning effectively, with competitive companies lowering their tariffs in response to falling wholesale prices, it becomes a lot harder to justify radical interventions and price caps.