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Future Focused

A Report on the Winter 2020 Self-Supply Users Forum

The Self-Supply Users Forum took place on 25th November, convened by Waterscan on behalf of the water self-supply community.

The meeting was attended by water self-supply retailers and licence applicants – Arla, Blackpool Council, BT, Coca Cola European Partners, David Lloyd Leisure, Greene King, Heineken, Sainsbury’s, Sefton Council, Marston’s, Stonegate Pub Company, Village Hotels and Whitbread – along with other business water customers keen to understand how self-supply could benefit their organisations. Water industry regulator Ofwat, market operator MOSL and wholesaler Anglian Water also participated.

Part One: Market Regulator and Operator Updates

Opening the meeting, Ofwat’s Principal – Market Outcomes and Enforcement, Shaun Kent spoke of the regulator’s response to the ongoing impacts of Covid-19 on the water market. Referencing a joint statement recently issued by Ofwat and MOSL and the Customer Protection Code of Practice, he confirmed priorities were to protect customer interests and reduce the risk of systemic retailer failure in the market.

In practical terms, this means easing pressures on liquidity, recognising that rising customer debt has knock-on effects throughout the market but that the scale of these impacts would not be immediately apparent. He was very clear that customers who are able to pay their water bills should continue to do so. At the same time, he advised that retailers are required to clearly communicate the protections that are in place to support customers that are experiencing difficulties and to offer repayment schemes tailored to their individual circumstances. In turn, Ofwat has put measures in place to support water retailers, including suspending market performance penalties until the end of 2020.

Ofwat will launch a formal consultation in the new year to invite views and gather evidence from the market on any further Covid-19 mitigation measures that may be required.

Shaun concluded his session by drawing attention to Rachael Fletcher’s (Ofwat CEO) speech this month to the industry’s CEO Forum, in which she set out the regulators’ future vision for the market. This vision puts business customers ‘front and centre’ and requires innovation and new business models to drive competition, reduce prices and increase efficiency. As a self-governed market in which all actors have to play their role, Ms Fletcher highlighted Ofwat’s need to see the right behaviours, evidence of sharing of the same vision and active engagement from all trading parties at both strategic and operational levels to realise this vision.

In response, meeting chair and Waterscan Managing Director, Neil Pendle, commented that ‘normal market behaviour’, including supplier switching, continued to be hampered by several trading parties and this was becoming a real issue for Forum members in some cases. In other areas, he reported a welcome change of attitude and more customer-focused behaviour from several wholesalers who are finally offering alternative credit terms for self-supply retailers.

Steve Formoy, MOSL’s Finance Director, used his session to outline the market operator’s newly published Strategic Horizons Roadmap to 2024. Comprising a core business plan and an improvement programme plan, this is the first time MOSL has put a long-term (three year) strategy in place. Doing so, he commented, would ‘raise the bar and deliver more at a lower cost and with more stability and efficiency’. In financial terms, it allows MOSL to smooth out market operator charges over a longer period for the benefit of all trading parties.

MOSL’s Improvement Programme consists of ten delivery workstreams, prioritised and phased as ‘Must do’ (a continuation of its bilaterals programme, for example, which has delivered £1.2m p/a savings to date), ‘Should do’ (i.e., rehoming the Central Market Operating System CMOS to the cloud which will save cost and reduce risk), and ‘Could do’ (a complete industry data cleanse, for example).

MOSL CEO Sarah McMath reinforced that these plans were now published for consultation and said participation from self-suppliers was really important. Indeed, the move to a three-year strategic roadmap was an outcome of last year’s consultation which suggested that the market was being managed on too short timeframes.

In response, Neil Pendle confirmed that self-supply retailers were very supportive of MOSL and that the group had noticed a step-change in recent months. Feedback from Forum members on MOSL’s plans would be supplied in due course

Continuing MOSL’s session, Sarah spoke of a newly created Strategic User Forum, which aims to engage trading parties at a senior level to unlock frictions in the market at a faster pace. Following a ‘challenging meeting’ which threw up a wide range of views, key areas of concern became apparent, not least metering. On this, Sarah commented: “The market simply will not function without timely, accurate meter reads but this data is not coming in consistently across the market. The self-supply community is way ahead on this, but the rest of the market isn’t.”

Claire Yeates, who will represent self-supply on the Strategic User Form commented that there was still a focus on ‘old problems’ and that this would need to change if it is to fulfil its potential.

Neil  added: “The self-supply community is fully supportive of this strategic forum and we have great hopes for it. We have a huge amount of experience here in the room and we’re keen to get involved and add value, but this time must be well spent and firmly future-focused.”

Part Two: Strategic Metering Review

Acknowledging that metering is fundamental to market success, Waterscan’s Operations Director, Barry Millar opened part two of the meeting. “Meters matter,” he said. “They’re the start and finish of everything. Otherwise the whole market is based on assumptions. Overall market data integrity, billing, sector goals like leakage reduction and water efficiency – none of these can be achieved without good data collection.”

He went on to report excellent results in reducing long-unread meters, LUMs, (those that had not been read for 12 months or more) across the self-supply community. As of the beginning of November, there were 140,000 LUMs (roughly 10%) in the market as a whole, with an upward trend towards 170,000 meters clearly visible. In contrast, there are just 265 LUMs across self-supply retailers, constituting roughly 1.5%. He outlined to the group how this will be reduced to 0% in the very near future.

John Davies, Chief Information Officer at MOSL, responded. “The functioning of the market as a whole all comes down to finding a meter, taking a reading, and feeding it into system in the most efficient way. There is no substitute for this activity,” he commented. He went on to state the complex nature of the metering landscape with no standardisation of equipment used or data outputs. He further highlighted that 40% of meter reads (including some 30,000 supply points fitted with automated meter reading technology) are rejected by CMOS due to data validation rules set at market opening. Resolving these issues will require a deep dive into asset and data ownership, responsibility and accountability, incentives and disincentives and technological barriers, he said. Three and a half years into the open market, John is keen to learn how self-supply retailers have achieved such success and how their approach might be scaled across the market as a whole.

Don Maher, Head of Wholesale Market Services at Anglian Water, joined the meeting to reveal an ambitious £multi-million programme to roll out smart metering over the next decade to build resilience across its water-stretched region. “We are at a real turning point,” he said. “Our region is expecting to be in deficit by 2045: this will see 1 in 10 customers without water on a hot summer day. We need to start thinking about how to avoid this now, but it requires strategic joined up thinking. Because large non-household customers operate across multiple wholesalers, we need nationally aligned approaches and technologies and we need to be think about how we optimise the data output to make it easy for those that use water to make effective decisions.”

In response, Claire Yeates congratulated Anglian Water on being ‘a force for change and leading the market resilience’ but noted that ‘not everyone is working at this level’.

Part Three: Resilience

Rebecca Gale, Account Director at Waterscan, picked up on the theme of resilience and risk mitigation with her report on an 18-month project undertaken in partnership with a member of the Self-Supply community. The aim of this project is to map where water-related risks lay across the company’s operations. Understanding these risks will inform the company’s sustainability strategy, technology rollouts, employee behaviour communication, and ultimately, its business and contingency plans.

A wide range of datasets – including population, rainfall, average business usage, household consumption and leakage rates – have been combined and referenced against catchment areas and the company’s supply points to create a ground-breaking approach to drought and flood risk analysis, accurate to 5km².

Moving forward, even more meaningful predictions will be created by overlaying further data including customer drivers, feed-in unit costs, weighting risks and using live information. “We want to be ahead of the curve, so access to live data is critical to move this work forward,” commented Rebecca. “Furthermore, this level of disclosure should have a domino effect on our national resilience because people who care about water in their business are likely to care about their water use at home.” Neil Pendle supported the need for live data ‘so that we can all start looking forward rather than back’.

Feedback on the results of this project from the Forum was extremely positive, several commenting on its importance and value. Accordingly, the concept will be shared with all self-supply retailers to get this level of valuable insight into customer hands as quickly as possible.

Finally, Waterscan’s Water Strategy Manager, Anastasia Sousanoglou, confirmed that Waterscan is now an official Accredited Solutions Provider to the Carbon Disclosure Project (CDP). This means that the community can use this as a tool to communicate progress and success in the sophisticated way that investors and stakeholders expect, putting water higher up the reporting agenda. Further information will be provided to Forum participants.

Closing the meeting, Neil Pendle thanked everyone for their attendance and enthusiastic participation, commenting that an awful lot had been covered in just two hours. Attendees agreed that it had been ‘a great session’ and ‘very informative’.

The Spring Self-Supply Users Forum will take place in March.