New start for Open Water

Just seven months after Ofwat’s formation of Open Water, and radical changes are afoot. Conor McGlone reports.

As Utility Week revealed last Friday, Keith Fowler, the programme director of Open Water, has stood down. His replacement is John Parsonage of PA Consulting, who is standing in on an interim basis while a permanent replacement is found. Meanwhile, the programme set up by Ofwat to deliver water competition will be handed over to a newly created company, Open Water Markets (OWM), which is in the process of appointing a board.
A spokesman for trade body Water UK claims that the water companies – which are paying for Open Water – are “fully committed” to the delivery of the programme. “The most important thing is that the water sector works together to implement the government’s agenda on competition,” he says.
Privately, however, industry insiders are concerned that such radical changes have proved necessary so soon.
Parsonage insists the programme is still on track despite the management overhaul. The need for additional funding to run the programme was the major driver behind setting up OWM, he says. Originally, it was going to be funded by Ofwat through licence fees, but that plan required the Water Bill to be enacted.
Following a consultation on Open Water’s funding in October, Ofwat decided in January to set up OWN so it could become the market operator upon market opening, which according to Parsonage was a “sensible move” given the decision that a new funding vehicle was necessary in the first place.
“There are advantages to having created OWM in the way that we have. It will allow us to put in place a pseudo governance structure for what we may have for the live market itself,” says Parsonage.
But shouldn’t this have been thought out at the start? Ofwat already admitted earlier this year that it needed to learn lessons from its licence fees fiasco, which saw it slapping more than £5 million of extra charges on water companies midway through the last financial year. Aren’t there hints here of a change of horses mid-stream?
Not so, according to Parsonage: “The programme has done a really excellent job in terms of driving forward the work that needs to be done, having delivered the first of the high level designs delivered at the beginning of the year. While that has progressed, at the same time the requirement to provide the additional funding that the programme is going to need to deliver, has been running in parallel.
“It was necessary to create a new entity, so we have actually created it earlier than we would have otherwise done,” he says.
If the funding had been provided to Ofwat via a special licence fee as originally proposed, Ofwat would have been best placed to lead on the procurement process for a delivery partner charged with building a central IT database, which will be necessary for competition (comparable to market operator Elexon in the electricity sector). However, now that OWM has been established and funding will be paid directly by water companies, OWM will lead the process.
Meanwhile, recruitment is under way for a chairman and chief executive, with the new board expected to be in place by June.
Parsonage pays homage to his predecessor, Keith Fowler, for the publication of the first part of the blueprint in January. “Under Keith’s stewardship the programme has done an excellent job of getting to where it is,” says Parsonage. “Tremendous effort went into that, there was some really good stakeholder engagement all the way through the process and we are in a really good position.
“My job is to keep that momentum going.”
However, Parsonage claims the new direction of the Open Water programme needs leaders with a different skill sets.
“With the creation of the entity, we needed to get this new governance structure in place and it does need a different mix of skills and experience. One of the things I bring is 20-odd years of experience in the design and implementation of wholesale and retail markets,” he says.
Despite the turbulence, Parsonage insists the programme is running on schedule, with the next version of the blueprint due to be presented to the market in May.