Water must get the message

The water industry is in danger of following the energy sector in establishing processes that allow a myriad of communication methods – which create problems for customers, says Gavin Jones.

We are approaching the opening of the water industry to competition and despite many having expressed the view that “water firms must learn lessons from energy retail”, it appears that some of the mistakes of gas and electricity are being repeated.

The industry is in danger of following the energy sector in establishing processes that create problems for customers through allowing a myriad of communication methods between market participants.

What can be learnt?

In gas and electricity, a large number of communications between market participants can be sent by email and other mechanisms alongside the secure structured messaging networks. This multitude of communication mechanisms leads to breakdowns in the processes and unhappy customers combined with damaged reputations for energy suppliers.

The gas and electricity industries are seeking to correct these mistakes by moving to mandate that more communications should be handled by structured messages. For instance, all Green Deal plans had to be communicated using structured messages across ElectraLink’s Data Transfer Network (DTN). Similarly, in gas the notification of old supplier information messages will soon be mandated to be sent as structured messages between all suppliers across the DTN.

Yet water is moving in the opposite direction with the interfaces outside those to and from Market Operator Services Ltd (MOSL) left up to wholesalers to define, with very limited commonality across the industry. So alongside different portal solutions, there are forms able to be downloaded, completed and sent by email, with responses sent as preferred by the wholesaler.

This is not an insignificant area either: the industry process documentation describes about 350 different communications required between retailers and wholesalers that aren’t covered by the interactions with MOSL.

From the history in the gas and electricity industry it is clear the future is not looking promising for customer satisfaction and the standing of the water companies.

Problems and what can be done

The original blueprint was clear. All messaging would be across the same secure network, but because of the problems with establishing the mechanism for the central procurement of settlement services, the scope of centrally defined messaging was reduced, and non-MOSL flows left to industry to define.

While the timescales now mean MOSL’s focus is rightly on establishing the settlement process, there is still time for industry to implement a structured messaging service. Learning from historic problems, the electricity and gas companies are moving to using ElectraLink’s DTN for the communication of messages, ensuring secure auditable and structured communications are sent and received. The water industry needs to introduce a similar policy to use structured messaging across a secure, auditable interface.

The first challenge for wholesalers is to ensure they have the systems in place so they get the right revenue from their customer base through MOSL’s new settlement system. With its very clear and direct impact on the bottom line, this has to be the prime focus. It is further complicated by the need to split their retail and wholesale businesses and the complications this will have on ­everything from IT and HR to building use.

Following on from this is the need to make sure their internal processes and work management systems fit the processes being established and that they can meet the ­service level agreements being set.

For retailers, the challenges are similar and vary between established players and new entrants to the market. Firstly, as the prime focus to ensure they invoice their customers correctly they need the interfaces between their billing systems and MOSL to be correct and the business process implemented to support billing and settlement. For existing retailers, the prime focus has to be on ensuring this works for their inherited customer base.

What consumers need is lower costs for their water services. However, what is important to understand is that this does not have to mean lower charges. In fact, it is likely consumers will be happy to pay a higher price if their total costs decrease – that is, they spend less of their own time in managing their portfolio, checking their bills, arranging for new connections, etc. This is likely to be particularly relevant to those customers with complex portfolios and multiple sites.

The challenge for customers is that the focus of the industry appears to be inward-looking, making sure the monies flow correctly. Having accurate bills is very important for customers, but so is having a smooth interaction should they wish to change supply or get a meter changed, for example.

These mechanisms are largely defined by the wholesaler, with limited consistency of approach. This may suit existing players with established customer bases that can offset the costs of interfacing to multiple wholesaler systems, across a large customer base, but will bear heavily on new entrants or those who have small numbers of customers.

The learning from gas and electricity is clear. Having a range of mechanisms is both a cause of customer problems and a barrier to entry for new entrants. There is still time for the industry to agree to use structured mechanisms, but time is short, particularly with shadow operation due to start in October.

Gavin Jones, director, Gavin Jones Consulting