Ofwat calls for faster reforms in non-household market

The pace of reforms to the market performance framework (MPF) has been too slow Ofwat’s chief executive David Black told the MOSL CEO forum, Institute of Directors event this week.

Speaking on progress and prospects in the market, the interim leader said Ofwat wanted to see acceleration in the reform process over the coming year to address issues with the framework, which was designed ahead of market opening in 2017.

The MPF was designed as a tool to monitor the performance and publish monthly reports on retailers’ and wholesalers’ performance in areas such as meter reading, processing switching requests and ensuring the market operates effectively. It became the subject of review in 2019 for a reform programme that will run to 2024.

“I don’t think it is wrong to expect to see substantial progress to have happened by the time we meet again next year,” Black told members of the non-household water market.

He called on trading parties to support the reform of the MPF as a priority, including ensuring MOSL has sufficient resources to take the work forward. The deadline for responses to MOSL’s call for input on the future of the MPF has been extended to 20 December.

He praised the introduction of the bilaterals hub, which was created to make interactions between retailers and wholesalers smoother and more efficient by using more automation and standardising interactions that had been a source of friction between parties.

Black also called for more innovation within the non-domestic sector to benefit customers and the environment. Despite some positive steps including Castle Water entering the Ofwat innovation fund with Bristol Water and the creation of the market improvement fund through MOSL, Black said there has not yet been “significant levels of innovation” compared to other industries. He suggested innovation would provide incentives for customers to engage with switching in the market if retailers could compete on more areas than price.

With narrow margins leaving little room for added customer benefits, Black suggested innovation could lower the costs to customers of engaging in the market through multi-utility bundling, or to transform the retailer offering.

“There needs to be a proper debate about how we improve level of innovation – aimed at identifying and wherever possible removing barriers to innovation rather than picking winners,” he said.

Reflecting on progress made in the past year, Black said “important steps” had been taken to ensure customers were central to all actions in the market but further work was needed.

Accelerating progress will require prioritisation of time, resources and effort on the initiatives that will deliver the biggest step changes for customers, society and environment, Black said.

He asked all market participants to support the recently appointed strategic panel to identify priorities and work together to deliver them.