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So far, so good – Q1 Market Review

This month we welcomed the first formal review of the non-household retail water market since its opening in the spring.

The CEO Quarterly Market Review released by MOSL (Market Operator Services Limited) demonstrates a good level of activity across the spectrum and perhaps a higher level of customer engagement than many feared.

Prior to the opening of the market, there were 25 regional providers of water and wastewater services in England but there are now 25 wholesalers with 35 retailers providing customer facing services nationally. While some water companies decided to exit the non-household retail market and concentrate on more profitable areas of their business, others took the opposite view and seized the opportunity to offer their services nationally. So the good news is that a wide range of choice has been given to organisations across England for the first time.MOSL Q1 Review image

But have customers benefited? That remains to be seen but certainly again, the indicators are positive.

MOSL reports that customers of all sizes have been taking advantage of the opportunity to switch supplier – a total of 36,301 services were switched in the first quarter. It sounds a lot but actually it equates to just 1.4% of the 2.6 million supply points in the market so there’s still much to be done to support customer switching and before we can claim the new market is a success.

However, one market force has become clear already: there is a strong customer preference for one retailer providing both water and wastewater services. 95% of all switches to date were either combining water supply and sewerage services or keeping both services with one retailer. Just 2% of switching has resulted in water and wastewater services being served by two separate retailers. This is a positive development in terms of organisations being able to simplify their processes and reduce costly administration time. Given this obvious customer-led direction, we would hope that retailers build on this and deliver further benefits by driving down prices and supporting consumption efficiency to reflect their enhanced market share and operational efficiency.

So far, so good and we applaud Chris Scoggins and his team at MOSL for achieving what looked like an unachievable goal this time last year. So, what’s next?

MOSL Q1 Review insideLooking ahead, it will be interesting to see what the market looks like six months from now as all parties settle down into their new (expanded or contracted) roles. Current teething issues will hopefully become resolved and the quality of data in the Central Market Operating System (CMOS) will be greatly improved. We expect there to be further movements in terms of the number of retailers, whilst we are confident more organisations will take up the self-supply option that we pioneered, too.

We would also hope to see a great deal more switching than has happened to date. For that to happen, we need to improve awareness and educate customers on the benefits of taking a proactive approach to their water supplier. A key challenge here is a lack of track records of successful outcomes to demonstrate tangible cost benefits and consumption savings at this stage.

MOSL also highlights the importance of data quality and increased transparency moving forward. “Effective markets rely on accurate and timely information being available,” its report states – and we couldn’t agree more. At Waterscan, we have always championed quality data and transparent billing – and have assisted hundreds of customers with these elements.

The plan is for MOSL to publish market performance information publicly in a bid to facilitate effective competition; and it will also review market performance standards and operational performance standards to ensure that they are “simple, transparent and proportionate for the market”.

We welcome this, and the next quarterly report from MOSL. Considerable progress has been made and the industry should be proud of its achievements to date.