Leader: water market must brace itself for TPIs

A taste of things to come this week, with Ofwat’s announcement that it wants to regulate third party intermediaries (TPIs) in the water market by proxy, ordering water companies to deal only with those TPIs that have signed up to a code of conduct. Whether this will be an effective means of regulating their behaviour remains to be seen. Certainly Ofgem has yet to win its ongoing battle to bring order and transparency to the TPI market in energy, shelving its latest plans for a TPI code of conduct this spring pending the Competition and Markets Authority findings on the energy retail market.

That’s not to suggest that TPIs are a bad thing. Indeed, the much higher customer satisfaction rating among business consumers of energy, as opposed to domestic consumers, is often credited to the higher penetration of TPIs in that market. A TPI is well placed to help a business customer understand and manage their energy use and find the best deal for their particular energy profile. The same will be true of the water market when that opens to competition for business customers in 2017, as Ofwat is anticipating.

Last week’s surprise announcement that competition in the domestic water market is likely to follow as early as 2020 makes this all the more pressing. A natural consequence of opening the market to competition will be the entrance of TPIs and particularly of price comparison sites. Already key players in the energy market, price comparison sites will no doubt scent an opportunity in the water market – and the potentially more lucrative arena of bundling together utility services.

But price comparison sites are not always the altruistic servant of the customer they may seem. There is sometimes murkiness around their independence and their commissions, which should be resolved before their role in the essential utilities market is expanded. For Ofwat, this week’s consultation may be just the start of a long task of protecting customers as a once simple market disaggregates and fragments.

• As Storm Desmond continues to rage, the essential nature of utilities is brought home to us once again this week. Utilities in the affected areas of the country have been working around the clock to restore water and power, and the government has promised a full review of the country’s flood defences. Utilities must be at the table for this conversation if the devastating impact of increasing extreme weather is to be brought under control.