Utility Week

UTILITY WEEK | 12TH - 18TH JULY 2019 | 27 Customers The measure of success is how much the market benefi ts customers T wo years a er the opening of the competitive water market is an appropriate time to look back and assess its success. But also, and perhaps more importantly, it is a good time to look forward to see what more can be done. The market opened, on time, in April 2017 which means that 1.2 million non-household customers can now choose their retailer of water and wastewater ser- vices. The market operator function has been set up, the Central Market Operating System (CMOS) is operational, the market participants are enacting the market codes, and importantly customers are switching. To get here has been a massive collaborative e‚ ort from many dif- ferent parties. CGI played its part by building CMOS and acting as the data partner for MOSL. Most important all of the market participants had to be ready on time – and they were. Let's all take a collective pat on the back for that suc- cess. But looking forward, there is still more to be done. More can be done to create friction-free market interactions. Smoother operational process will help participants to reduce their operating costs and poten- tially pass on these savings to customers. It will help provide a more joined-up service experience to custom- ers. We see the introduction of the bilateral replacement solution as a major enabler in this area. Data quality can and should be improved and this too will help create smoother operational processes. The market must also ensure that competition thrives and brings the innovation that was always anticipated. Perhaps the approach here is to create a more open market, a market in which new entrants, entrepreneurs and disruptors can bring new services: B2B services that will help the current market participant deliver their ser- vices more e' ciently; or B2C services brought directly to customers. We believe that bilateral replacement could be the platform for this open market. Ultimately though, when we judge the success of this market we must measure it in terms of customer bene• t. As well as reductions in bills, this is about improved cus- tomer service and new, innovative services. It was reas- suring that this focus was at the forefront of the debate. We very much look forward to continuing our relationship with MOSL and the market participants in delivering a thriving competitive market, and ensuring that the bene• ts of that market work their way through to customers. Opinion Graham Hainsworth Director, Consulting Water Sector Key discussion points: • Doing the right thing for customers: Wholesalers are frequently overriding complex codes for better customer outcomes; calls for principles- based code review; calls for better wholesaler incentives for end customer service; questions raised about the meaning of low market engagement among smaller customers; need for reanima- tion of awareness campaign. • Market complexity and bar- riers to improvement: Calls for greater clarity of regulator market expectations and co-ordination of market-led collaboration e orts; appetite to review codes and panel governance. • Meter reading and data quality: Controversy over the incentives for retailers to improve meter reading performance; meter reading operations ine• cient and key challenge for driving down cost to serve; calls to reallocate meter reading responsibility to wholesalers who could derive valuable network insights through data collection. • Tracking innovation bene ts – including overspill to the domestic market: Key to de• ning market value but di• cult to quantify. Lack of ownership for innovation bene• ts monitoring. Brought to you in association with Solutions So, what can be done to iron out all this complexity and make room for real value creation? Attendees were clear that there is a big opportunity for industry to step up and resolve certain challenges through collabora- tion and co-operation. Complexity in whole- saler-retailer interactions and in wholesale tari‚ s, for example, could be signi• cantly reduced through industry e‚ ort. It was heartening to hear a range of exam- ples over dinner about how this is already happening. But there was a strong feeling from market participants that market-led col- laboration will only get so far in addressing complexity. In order to engage less forward-thinking players and create whole-market bene• ts, there was clearly a hope and expectation that Ofwat, or the market operator MOSL, should intervene to co-ordinate and con- solidate the simpli• cation agenda. There were calls for the regulator to help estab- lish an ideal structure for wholesale tari‚ s, for example, alongside hopes that it might consider rewriting the allocation of respon- sibility for meter reading and reconsider the incentives in place for wholesaler service to end customers. Such expectations smack of a linger- ing regulated utility culture in a now com- petitive market, as one debate participant privately pointed out to Utility Week – one which tends towards dependency on regula- tor instruction. But it also highlights a sense of uncertainty in the open market about what the regulator wants from it and what the dynamic between this newly competitive part of the water sector and Ofwat ought to look like. Arguably, the market operator could bridge this divide, but it was obvious from discussions that continuous senior manage- ment changes and o' ce relocation chal- lenges over the past year or so have impacted MOSL's voice and position in the market. With another new chief executive now in place at the market operator, this time with strong water industry experience, the time may well be ripe for MOSL to reassert itself. With participants struggling to grasp hold of the issues they know are undermining market potential, it would have been easy for this industry gathering to end on a negative note. But far from it. Buoyed by the chance to discuss challenges in a neutral environment, the event closed with strong expressions of optimism. With common agreement on the challenges at hand, only a spark is needed to reignite the spirit of co-operation and dili- gence which brought the market into being and build on its foundations.

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