Switching remains low among water retail customers

The number of customers benefiting from competition within the non-domestic water sector remains low, with only around four per cent of eligible customers switching supplier, Ofwat’s latest review of the market has shown.

Larger, higher consumption users experienced more advantages from changing retailer or re-negotiating with their supplier than small businesses, the report concludes.

In its third year, overall awareness of the market increased to 58 per cent, up from 53 per cent in 2018/19. Higher consumption users are more aware while smaller usage customers remain less aware and less active.

The report indicates that the majority of customers (86 per cent) are microbusinesses with 0-9 employees who account for 11 per cent of water consumption. SMEs account for 13 per cent of customers and consume 25 per cent of total water. Large businesses make up less than one per cent of customers but use 64 per cent of the water.

Around 1 in 12 of all eligible customers switched or re-negotiated in the past year and it was more likely to be medium or large businesses that did so. Only 8 per cent of microbusinesses, 16 per cent of larger SME businesses, and 26 per cent of large businesses were active.

For those who switched, brokers were the most used way to find an alternative supplier.

Progress has been made to improve persistent “friction points” of poor-quality market data, difficult interactions between retailer and wholesaler, and poor wholesaler performance.

Ofwat’s director of business retail market Georgina Mills praised efforts by industry to improve these issues of basic functionality in the past year but said this needed to be a priority for all trading parties if the market was to deliver for customers.

The research shows around 90 per cent of those who switched or re-negotiated their deal in 2019/20 saw a benefit.

Saving money was the main motivation for switchers (45 per cent) and re-negotiators (49 per cent), while dissatisfaction caused 12 per cent of people to switch.

Satisfaction remained high, with 78 per cent of billpayers reporting contentment with their retailer. Unsatisfied customers cited billing disputes (69 per cent), customer service (54 per cent) and metering issues (24 per cent). Related complaints to Ofwat were down to 388 from 482 the previous year.

Mills said: “The market is delivering benefits for customers who exercise their choice to find a better deal. But awareness and activity continue to be lower for smaller customers, many of which continue to be protected by regulation. It’s positive to see complaint levels falling in year three and we hope this trend continues into year four.”