Water deregulation from 2017

The opportunity to switch water supplier in the UK is currently limited to non-domestic properties in Scotland and for very high water users in England and Wales who use in excess of 50,000m3 per annum.

The retail market in Scotland was de-regulated in 2008 and has incurred several problems, especially with retailers being unable to meet all the market conditions. The Water Industry Commission for Scotland has now recognised the problems and have negotiated further retail margins, therefore it is anticipated that there will soon be genuine competition in Scotland with positive impacts on price and quality of service.

OFWAT have closely followed the deregulation model in Scotland and will, hopefully, have learned many of those lessons before commencing deregulation. In England this will be in April 2017, however, the Welsh Government has opted out. They did not agree with introducing competition into the non-household market in Wales because they “have not received any clear modelling or evidence to demonstrate the benefits of competition”. Northern Ireland also has no plans to deregulate in the near future.

Following deregulation, the concept is that customers in England will be able to choose a company for its good customer service and added-value packages or simply to reduce costs. In theory, those suppliers who do not offer a better service will lose customers to those who do. Better customer service has been noted in Scotland and this is also expected south of the border following deregulation.

DEFRA have been promoting deregulation as they believe it will “encourage innovation and efficiency from water companies” as well as improving the service. This, they say, is a compelling argument for deregulation despite the disruption it is likely to cause.

However, most water companies work on a gross profit of about 1% so margins will be tight and it is estimated that only a 1-2% saving may be gained by switching supplier. It is, therefore, another decision managers will have to make and perhaps some will choose to stay with their current supplier given the extra time and effort required for apparently little gain (depending on water usage). However, one thing is certain and that is, similar to the supply of electricity and gas, the number of calls and emails offering great savings and better service is set to increase.


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