Guy Fawkes night may still be several days away, but the fireworks some customers might have hoped for from Defra have started with only a slight fizzle.
Yesterday it was announced that the consumption threshold at which non-household customers in England can switch water suppliers will fall from 50 megalitres per site per year, to five megalitres.
This is undoubtedly encouraging, and definitely a step in what many customers already think is the right direction –a fully-competitive, customer-centric market across the whole of the UK.
If you can sense a ‘but’ coming you’d be right, however. While we would generally accept the need for caution in new ventures – fools rush in, etc – the market has been proven in Scotland and has delivered customer benefits whichever way you look at it.
Competition and market forces have delivered better value for money, greater innovation, and improved customer service – all of which has been driven by the need to raise the bar to retain customers. Non-household customers of Business Stream – not considering customers of other licensed providers – have been offered almost £50 million between reductions in consumption and discounts. The reduced consumption has also saved 12,000 tonnes of CO2.
Defra’s move, while welcome, will still only enable 26,000 sites to switch, excluding more than a million shops, public services, restaurants, offices, and many others who could feel real tangible benefits from competition. This will disappoint many of our customers in Scotland which have operations in England consuming less than five megalitres, and were hoping to be able to switch suppliers.
Moreover, customers in England still aren’t able to change providers of waste water, trade effluent or drainage services, which means that they may receive one bill for water, and another for these other services.
The pricing structure allows for very narrow profit margins and competing suppliers will not have enough flexibility to drive innovation and pass on significant savings to customers. Entering any new market is a major investment, but if the potential reward isn’t there it could potentially neutralise a truly competitive market where the participants are on their toes and actively looking to constantly improve the services they deliver.
What may result from all of this is ‘competition light’, which may ultimately do very little to deliver the potential benefits of an active, open market. Treading carefully in this matter is understandable, however, the customer should be at the centre of the decision-making process.
The Government will in December will publish a White Paper detailing full proposals for reform of the water industry in England, which is expected to include timescales for the introduction of competition into the non-domestic market. How far these proposals will go is still uncertain.
However, we think there is an opportunity to provide greater incentives to suppliers, and deliver real benefits to customers, so that any vision of competition is allowed to become a reality without unnecessary barriers.