Market participants need to ‘step up’ to deliver for customers: Ofwat reviews the second year of the business retail market
Customers have saved around £10million in the second year of the market but urgent action is required to get the market working effectively and unlock better outcomes for more customers; according to a new report reviewing the second year of the business retail market from water regulator Ofwat.
The report highlights that progress made by the sector to resolve a number of market frictions in year two has been disappointing. These frictions – which include poor aggregate wholesaler performance, poor quality customer and consumption data, and some inefficient wholesaler-retailer interactions – undermine the overall effectiveness of the market and its ability to deliver improved customer outcomes.
Around 13% of eligible customers in England have been active in the market since it opened in April 2017; with those switching or renegotiating making financial savings of around £10 million during the second year. Some customers have benefitted from increased water efficiency, for example three self-supply licensees reportedly saved around 150 million litres of water between them in 2018.
Alongside its assessment of the second year of the market, Ofwat has also announced decisions following its review of the Retail Exit Code (REC); to continue to protect the interests of customers and promote effective competition where appropriate.
Lower usage customers, who are currently much less likely to engage in or benefit from the market, will see retained price protections that will apply from April 2020, while higher usage customers will see price protections retained but relaxed as they are more engaged and more able to benefit from the market. In addition, Ofwat has taken steps to strengthen protection for customers against non-voluntary changes in their non-price terms. Ofwat intends to revisit the price protections in two to three years.
Emma Kelso Senior Director Markets and Enforcement at Ofwat, yesterday said:
“Resolving the market frictions is vital to maintain the momentum of the business retail market and to get it to deliver better outcomes for customers; but it will require all market participants to step up and work collaboratively.
“Our decisions reflect the fact that the market is still developing. We want to see more customers benefitting from an effective and vigorous business retail market but we also want to ensure those businesses that for now are less able to engage, are not exploited.
“Despite some good progress from some of the industry players, the sector needs to take urgent action to resolve market frictions swiftly in the third year of operation.”
Notes to editors:
- Rachel Fletcher has recently written an open letter to wholesalers noting that their overall level of support for the development of effective markets is unacceptable.
- The revised Retail Exit Code (REC) can be found here.
- The consultation documents for the price requirements of the code can be found here.
- The consultation documents for the non-price requirements of the code can be found here.
- For further information on the business retail water market, visit www.open-water.org.uk
Latest News from
Ofwat announces appointment of first Head of Wales30/07/2020 12:43:00
Ofwat has today announced the appointment of Bethan Evans as its first Head of Wales – establishing a permanent presence in Wales for the first time.
Ofwat implements new customer protections15/07/2020 16:38:00
Ofwat yesterday announced that it has modified the licences of 16 of the 17 water companies in England and Wales, who have accepted new ring-fencing provisions.
COVID-19 and the business retail market: Ofwat consults on next steps10/07/2020 11:15:00
Ofwat, together with the market operator MOSL and other industry stakeholders have taken a number of steps to protect the interests of business customers in the water sector during the COVID-19 pandemic.
Ofwat proposes to strengthen financial ring-fencing provisions to protect customers15/05/2020 15:15:00
Ofwat is today consulting on updating the ring-fencing provisions contained in the licences of the 17 water companies in England and Wales, which, among other things, protects customers by restricting payouts to shareholders in certain circumstances, such as if the company is in financial distress.
COVID-19 and the business retail market – Final decisions to address liquidity challenges and increases in bad debt01/05/2020 14:10:00
Ofwat has today published its final decisions on how it will intervene to support customers’ interests in the business retail market through the current Covid-19 pandemic.
Ofwat proposes package of measures to protect business retail customers and minimise disruption in the market20/04/2020 10:15:00
The impacts of COVID-19 are being felt across the whole of the UK economy and throughout each and every sector. In water, the business retail market in England will inevitably be affected, both through businesses closing and as social distancing affects retailer operations.
Ofwat makes submission to CMA following company appeals19/03/2020 17:08:00
Ofwat has today made its submission to the Competition and Markets Authority after four of the 17 water companies appealed to the CMA against the outcome of Ofwat’s recent price review.
Ofwat confirms financial arrangements have to serve customers interests25/02/2020 10:15:00
Ofwat yesterday published guidance to protect the interests of customers and the financial resilience of water companies.