The electricity market was deregulated in the UK in 1998 and allowed the regional energy providers to supply any home or business irrespective of their location. This change provided an immediate choice of supplier options and introduced new players to the market. A similar deregulation is scheduled for the regional water companies after 1 April, 2017—but only for business users. This article covers everything your business needs to do to prepare for these upcoming changes.
The current situation
At present, no consumer or business has a choice of who their water supplier is, unless you’re a commercial customer using over 5,000 cubic metres of water each year. After 1 April 2017, the English market opens up to full competition from any regulated supplier for all business users. Residential consumers will need to wait for a change in their circumstances. The business market is seen as a test bed for the market.
However, Scotland has had water deregulation since 2008, which was rolled out in several stages. Only now are real savings coming through as more competitors enter the market.
What happens From April 2017?
All existing water companies can pitch for your water business. Much like with the energy market, you’ll be able to compare prices on the comparison websites, perform your own pricing quotes on the water company websites, or use a broker to find the best deals.
You’d think that substantial savings could be made because business water prices vary a great deal by company around the UK regions, but you can’t simply pick and choose based on the current tariffs. You’ll only have a choice from those companies offering the service within your region.
For example, if you’re supplied by Thames Water, Anglian Water may select your area to offer a competitive tariff. But their tariff is geared towards the Thames Water market, where the cost of supply may be different than their home base.
Will I save much money by switching?
In the early years of deregulation in Scotland only nominal savings were realised. It’s forecast that similar nominal savings of up to 6% would be achievable for the new English markets. Really, this change only affects smaller businesses because large consumers of water can already negotiate their unique deals. There’s likely to be some downward pressure on prices, but the water companies, like their energy counterparts, still have large-scale investment plans that need completing. Pressure on margins is likely to keep prices at reasonable levels.
Unlike the energy markets, where switching your electricity supplier from a renewal letter saves a business 50-60% of their bill, the water industry currently doesn’t operate that way.
Perhaps the water companies will learn from the tricks that occur in the energy markets to increase prices. Some of the energy companies are already gearing up to offer a water product into the new market.
What Other Benefits Are There?
Choice. Consumers always demand choice. They like to decide where to place their business rather than be dictated by central government, and this change provides that. If you’re fed up with poor customer services or confusing bills—or simply want a change of supplier—then deregulation is going to help you.
Consolidate suppliers for multi-site businesses. Companies that have more than one site can now manage all their sites with one supplier. That’s much easier for their procurement departments. Consolidation could produce substantial savings for large high street chains that currently don’t qualify to directly negotiate because none of their single sites consumes more than 5,000 cubic metres of water per year.
What Should I Do Now?
Once the market opens, you’re likely to see some exciting offers that may not last too long. Therefore, it’s best to calculate your usage by finding some current bills. Comparison sites only require limited information to calculate potential savings, but usage is a key driver to find the correct tariff. Nothing can happen until April 2017, but don’t wait until then to find the relevant information you need.
Although you can give notice to your current supplier that you want to switch, there aren’t any live prices available for 2017. Not all water companies have chosen to compete in the new market, but you’ll still have at least 16 water suppliers to select from.
What Likely Changes are Ahead?
The water companies have a different regulator than the gas and electricity companies. Ofwat looks after water, versus Ofgem, who regulates energy. They want this change to be successful to not only help businesses save money, but to make the transition smooth for consumers. But with these changes comes extra responsibility for the customer as well as additional paperwork.
By Jason Smith, blogger, energy expert and manager of Business Electricity Prices
