How greater competition within the water market could be part of the solution - Craig Dallison
Last week marked a milestone moment in the water industry. Described as a ‘once in a generation’ review of the water sector, the Cunliffe Review’s concluding document was published, with recommendations to drive much-needed reform within the sector.
And the main recommendation? To scrap the regulator, Ofwat, for its failure to promote long term investment in water infrastructure.
Creating a single, super-regulator presents the government with a real opportunity to rebuild regulatory frameworks that truly deliver what is needed to protect the interests of customers and the environment both now and in the future.
However, no single change is enough to deliver the level of reform needed. The industry needs a shakeup. And a big one at that. A total of 88 wide-ranging changes have been advocated for, which is a positive step forward, but words need to translate into action.
From a business perspective, water services are managed by retailers, not wholesalers, which is our line of work. Retailer competition for businesses has already driven improved customer and environmental outcomes. Businesses are empowered to choose who they source their water from and can move to another supplier easily if they are dissatisfied with the current service. This competition helps drive service standards, innovation and efficiency outside of the wholesaler market.
There is more we could do to leverage the benefits of competition. What we’d now like to see from the government, as well as the incoming regulator, is more consideration of how greater competition within the water market could be part of the solution to recovering customer trust and improving environmental performance.
Monopoly water wholesalers have a real challenge on their hands. Customer trust is justifiably at an all-time low. Replacing and repairing the UK’s water and wastewater infrastructure is not going to happen overnight, which means shifting public perception will be a challenging journey for wholesalers.
If retailers can help ease that pressure by freeing up wholesaler capacity to focus on the recovery of critical infrastructure, address leaks and wastewater spills, then that should be considered a win-win.
Water retailers can do the heavy lifting when it comes to engaging with customers and making their experience seamless. They are not affected by the same trust issues as water companies being removed from the management of things like water leaks and wastewater spills. But in the interest of retaining customers, retailer competition spurs innovation and efficiency.
A shift in the regulatory approach to addressing water scarcity could also see competition bring new technologies and service models to bear. The smart meter roll out does not need to be delivered by wholesalers. A competitive delivery model for this and other water efficiency services – driven by the right incentives – could be transformative. Business customers themselves need incentives to crack down on leaks and invest in water recycling where appropriate. Customer incentives would drive a market response.
In the upcoming white paper this autumn, we would like to see greater recognition of the value of separating the customer-facing aspects of water service to retailer competition. Greater competition in water would offer wholesalers a greater opportunity to focus on infrastructure management issues in the sector.
Craig Dallison is the CEO of business to business water retailer Everflow Utilities.