Water retail – time for a market reset

Two and a half years on from the opening of the non-domestic water retail market, significant hurdles to smooth operation remain, not least around meter reading. Last week senior figures from the industry met to discuss these challenges with the market operator, MOSL. Jane Gray gives her view on the key points from the debate.

It’s no secret to anyone working in or around the competitive non-household water market that things are far from rosy when it comes to delivering on the value case that prompted market opening over two years ago.

While the market opened on time and successfully introduced the capability for businesses to switch their water supply services between a variety of new and incumbent retailers, engagement from the total potential customer base remains low and, as Ofwat evidenced in its recent state of the market report, a range of market friction points are negatively impacting the efficiency of trading party operations.

Ultimately, these friction points – like poor quality meter data and a lack of consistency in wholesaler tariff structures – are leading to a lower than desirable customer experience for many and are distracting trading parties from work they could be doing to innovate and add value.

This week, the new chief executive for the market operator MOSL, has called on the market to formally acknowledge this situation and unite for a “reset”.

At an industry forum with participation from key movers and shakers in market opening and the subsequent operation of the market, Sarah McMath set out the bones of MOSL’s new business plan which looks out to 2021.

At it’s core, the plan is all about increasing “ease of doing business” – for trading parties interacting with core market systems, but ultimately for non-household customers who, it was acknowledged at the meeting, currently have to overcome an unreasonable level of market complexity in order to access questionable value in terms of bill savings or efficiency benefits.

If trading parties decide to back MOSL’s new vision – which represents a significant change in direction from the “thin” operating model set out for the organisation at market opening – a number one priority will be gaining industry consensus behind changes to meter reading obligations.

Current arrangements which place the whole responsibility for meter reading on water retailers have been attracting growing discontent.

Water retailers are struggling to fulfil the expectation due to lack of knowledge about meter location (partly thanks to incomplete data at market opening) and this is leading to customer billing problems. But water wholesalers too are suffering from losing touch with non-household meter data in an environment of regulatory crackdown on leakage levels. So much so that several wholesalers have reinitiated meter reading operations in this space, doubling up on retailer activity but adding nothing to the completeness or accuracy of data in the central market operating system (CMOS).

While it might have seemed politically expedient to put meter reading solely in the hands of water retailers at market opening, subsequent market developments have proven that it was not the best choice for delivering longer term value. If the market can coalesce around an agreed plan to alter meter reading rules and open up access for providing verifiable meter reads to a wider range of players, then regulators and policy makers would be well advised to accept the recommendations.

It could be a first significant step to a wider market re-set and a big step forward for delivering the open market value case.