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Credit Where Credit’s Due

A Report on the Spring 2021 Self-Supply Users Forum

The Spring 2021 Self-Supply Users Forum took place on 17th March, convened by Waterscan on behalf of the water self-supply community.

The meeting was attended by self-supply retailers and licence applicants – Arla, Blackpool Council, BT, David Lloyd Leisure, Greene King, Heineken, John Lewis Partnership, Sainsbury’s, Sefton Council, Marston’s, Stonegate Pub Company and Whitbread – along with other large commercial water users keen to understand how self-supply could benefit their organisations. Water industry regulator Ofwat, market operator MOSL, and Thames Water also participated.

Part One: Market Updates

Waterscan’s Managing Director, Neil Pendle, and Operations Director, Barry Millar opened the meeting with their market and operations reports.

Following the switching of Sainsburys supply points, the self-supply community now accounts for a market share of 0.6% with over 16,400 supply points.

Self-supply continues to lead market performance, achieving a 97.5% market performance score for all three months in the quarter November 20 to January 21. It was noted that the wider market is striving to replicate its success: a Retailer-Wholesaler Group has developed a water efficiency action plan, reminiscent of how self-supply customers plan their water journeys.

Of particular note, Neil reported ‘fantastic progress’ on credit terms for self-suppliers. Thirteen of the fifteen water wholesalers now offer alternative credit options. Eight have introduced variations of the retailer driven proposal developed by Waterscan that acknowledges the differences in risk posed by different retailers.

“The introduction of a wide range of alternative credit arrangements signals a marked shift towards more effective and efficient market solutions with less administrative frictions and financial externalities,” commented Neil.

He went on to advise that a priority for Waterscan has been the repatriation of cash held by wholesalers as security deposits which has now been dramatically reduced. Work is ongoing to recover any remaining amounts.

Commenting on the widely anticipated ‘bill shocks’ expected in April, Neil advised that Waterscan’s current primary focus is to ensure that all its customers have a ‘soft landing’ as each sector comes out of national lockdown. This involves a lot of meter readings, followed by a great deal of analysis on settlement to ensure self-supply companies have predictability with their water bills.

On consumption efficiency, the self-supply community is ‘doing very well’ in tackling leakage and thanked all attendees for their collaborative efforts. Although extremely difficult to benchmark in an extraordinary year, the self-supply community has reduced water use by 6-7%, compared to rest of the market at 0.5%.

Finally, with regard to managing long-unread meters, the self-supply sector continues to perform exceptionally well with 3.5% total unread meters compared to a market average of over 30%. Even though the latest national lockdown has impeded progress due to difficulties accessing internal meters in closed properties, driving this down further continues to be a priority and customer collaboration regarding access to meters is critical to achieving this.

Reflecting on the market, almost four years in, Georgina Mills, Delivery Director at Ofwat acknowledged that there remains a ‘big difference’ between awareness of, and participation in, the water market and she outlined some of the market frictions that impede engagement. She reiterated the market regulator’s vision to deliver a market that creates value for customers.

Innovation is seen as key to achieving this, but it is not for Ofwat or MOSL to determine what that looks like, rather it is their role to remove any barriers or inhibitions to innovation. She highlighted that all market participants, including the self-supply community, have a clear role in identifying barriers to change.

For the year ahead, Ofwat has two stated priorities: to support customers through the pandemic and beyond, and to encourage an increased focus on water efficiency in what is now a clear policy priority. She noted that, although there was limited take up of water efficiency measures across the non-household market, Ofwat is very aware that the self-supply community ‘bucks the trend’ on this.

Shaun Kent, Ofwat’s Principal – Market Outcomes and Enforcement picked up on the topic of water efficiency, highlighting a recently published plan by Defra to create a Senior Water Demand Steering Group to provide direction to the industry. He warmly encouraged meeting participants to get involved.

Sean also spoke on customer bad debt, which the regulator expects to become a significant issue this year, predicting a rise to between 25-50% (far exceeding the 2% threshold it would expect prudent retailers to bear). The regulator is considering proposals for revisions to regulatory protections and a uniform uplift on price caps to counter this.

Data gathering for Ofwat’s fourth State of the Market Report will commence in April with publication expected in September. At the same time, a further customer insight survey in collaboration with the Consumer Council for Water has been commissioned.

Sarah McMath, Chief Executive of market operator MOSL advised that its Business Plan has now been approved and she thanked the self-supply community for its engagement during consultation on this. Consultation is now underway regarding market governance and voting procedures.

Sarah outlined organisational changes at MOSL, which include the creation of a centralised Data Insights and Analytics Team to deliver greater insight and data sharing across the market. A new website will help to drive engagement across subject matters with greater functionality too.

Like Ofwat, MOSL is supporting the market transition out of lockdown and is preparing for potential bill shocks in April. Sarah highlighted the importance of learning from Covid-19 and significant disruption events.

MOSL’s annual trading party survey is now live. Its annual report is expected in May.

Part Two: Resilience

Following an interesting presentation on risk mapping at the last Forum, Yvonne Mason, Environment Manager and Ross Greenhalgh, Energy Manager at Whitbread, along with Waterscan’s Rebecca Gale, were invited to speak more about the corporation’s impressive water stewardship work.

Yvonne advised that Whitbread has been reporting on climate change with Carbon Disclosure Project (CDP) since 2010 and there’s no doubt that this has helped drive year-on-year improvements for the environment and in identifying risks and opportunities for the business.

Ross went on to highlight various examples of how Whitbread manages water effectively and how both risk mapping and CDP disclosure have provided a superb framework for improvements, incredibly important for Whitbread sites situated in water stressed areas.

Waterscan’s Water Strategy Manager, Anastasia Sousanoglou advised dates for this year’s Carbon Disclosure Project (CDP) reporting and pointed attendees towards resources for further information should they wish to consider a water disclosure in 2021.

Part Three: Market Operations

Luke Austin, Market Improvement Lead at MOSL updated the Forum on a major data cleanse initiative, in recognition that data quality issues continue to cause significant operational challenges to the market, in turn impacting customer outcomes and trading party performance, from market entry and customer switching though to metering and asset maintenance.

Seeking to address this, the project scope includes: incentivising both data owners and data users to improve accuracy and to share information; reviewing market codes and CMOS submissions to make meter reads easier to submit, and consistency of customer names across all trading parties.

Engagement with the market, including the self-supply community, was welcomed.

Closing the meeting, meeting chair Neil Pendle thanked the special guests for their support and those amongst the community who completed the Self-Supply Users Forum feedback survey to ensure that Waterscan continues to organise events that best suits their needs.

The Summer 2021 Self-Supply Users Forum will take place on 16th June 2021.