MOSL calls for non-household specific ODIs at PR24

The success of water metering in the non-household market hinges on the investment provided in PR24, market operator MOSL has said in its response to Ofwat’s consultation on the price review.

Accounting for approximately one third of the water publicly consumed in England, the business water sector is a significant player and should, MOSL iterated, make a significant contribution to tackling the shared long-term threats the industry faces.

MOSL suggested Ofwat introduce outcome delivery incentives (ODIs) as a means of encouraging investment by wholesalers to fund non-household meter replacements and smart meter rollouts in business plans. It said the lack of ODIs should be reviewed as part of PR24 to support better metering.

It further advocated for stronger incentives to be introduced to deliver long-term benefits for the business sector such as rebalancing the cost of consumption, readdressing cost allocation to incentivise wholesalers, improving retailer margins and encouraging investment in metering and data.

One per cent of non-household customers use more than half of water consumed by businesses. MOSL therefore stressed the importance of a granular understanding of usage patterns to mitigating problems related to water security.

Its response said it is fundamental to data quality that meters be accurate, easily located and support new technology for smart meter reading. This would allow the integration of consumption data to feed into long-term resource planning and helping the sector reduce its usage.

Based on Environment Agency data, MOSL said 37 per cent of consumption was located in areas with a high deficit and 64 per cent in areas designated as in serious water stress.

Despite this, there is no incentive for wholesalers or retailers to reduce non-household demand as the current focus is on lowering household consumption. MOSL said the voice of businesses appeared missing from current environmental debate at a critical point when companies need investment certainty on outcomes and obligations.

The response suggested the sector needs more innovation but said it is being negatively impacted by the industry’s excessive aversion to risk. It asked Ofwat to proactively engage with water companies, MOSL, CCW and other stakeholders to identify opportunities for investment that would deliver long term benefits for customers.

MOSL said: “There is a need to balance controlled risk with the benefits of innovation. Without innovation the NHH market will not progress towards active competition, new retailers will not enter the market, existing retailers may choose not to take on new supply points and service to customers may decline.”