Water retailers divided on year-one switching levels

Water retailers have differing views on the level of switching likely to occur in the first year of the open market, with some suggesting as many as 10 per cent of business customers could switch.

Speaking at Utility Week’s Water Customer Conference last week, Market Operator Services Limited (MOSL) chief executive Ben Jeffs said retailers have told the company that they expect anything from one or two per cent of customers to 10 per cent of customers to switch in the first year of the open market.

Anglian Water Business is among those who believe that switching rates will be relatively high – around 10 per cent. The company’s managing director Bob Wilson told Utility Week: “We believe that when the water market opens, excellent customer service, consolidated billing, streamlined administration, and value-added offers are likely to become the key switching ‘pull factors’.”

SES Business Water managing director Giuseppe Di Vita agreed, saying that, while lessons from Scotland showed that it took some time for businesses to fully engage in the open market, there is “no reason why switching levels shouldn’t be far higher in England now that the benefits of competition have been proven”.

Northumbrian Water Group Business managing director Lucy Darch said the company expects around 5-10 per cent of the market will switch in year one, comprising mostly multi-site businesses.

“We expect many multi-site businesses will engage with the market early, in fact some Tender Requests have been issued already,” she said. “At a recent [Major Energy Users Council] event, many of the attendees indicated that they would wait and see how the market opens and hear about the experiences of the early-movers before they go to the market in the summer.”

However, Cobalt Water managing director Scott MacLeod said he expected switching rates to be much lower. He told Utility Week that he would be surprised if as many as 1 per cent of customers switch in the first year.

“Our opinion is that apart from some larger multi-site operations, there will be very little switching activity in England post market opening,” he said. “Our experience in Scotland is that the motivation to switch is almost always cost and with the very small margins available that incentive will not be available.”

South East Water Choice said it thinks there are three scenarios affecting businesses and therefore switching volumes may vary depending on their current situation. However it also suggested that switching rates will be less than 10 per cent in the first year, under any combination of likely scenarios.