Utility Week

26 | APRIL 2022 | UTILITY WEEK Water Analysis Water retail: looking beyond the friction points Utility Week talks to retailers about how they can contribute to the ambitions of the wider water sector and move beyond the challenges that have persisted since market opening. A ccounting for one-third of water con- sumption in the UK, the non- domestic sector has a major part to play in e orts to manage demand to protect the environment and lower carbon emissions. The Department for Environment, Food & Rural A airs (Defra) has given a clear steer to the water sector that the environment must be the top priority in investment and infra- structure decisions over the coming decades. Its Strategic Policy Statement (SPS) to Ofwat centred on improving water quality in rivers, preparing for a drier century and managing water resources in a way that will not over- burden future generations of billpayers. With 30% of all water supplied used by businesses, industry, agriculture and the public sector, the non-household water mar- ket has an essential role in achieving these ambitions. Celebrating its ‹ Œ h anniversary in April, the water retail market has experienced per- sistent points of friction that its participants, the market operator MOSL, and Ofwat have worked together to resolve. These e orts include making transactions between whole- salers and retailers uniform and improving data in the Central Market Operating Sys- tem (CMOS), particularly from water meters, some of which are di" cult to locate. There is broad agreement that these prob- lems need remedying but market players are looking beyond these to how the sector can contribute to the wider conversations around water e" ciency, the environment and reach- ing net zero. The SPS laid out expectations that Ofwat should "focus its e orts" on the retail market by using competition to stimulate long-term sustainable investment and bene‹ ts for bill- payers. Ofwat should, the SPS says, think about whether changes to market rules, processes and structures could boost resil- ience and investor con‹ dence while deliver- ing better outcomes for customers and the environment. The SPS, which will inform the 2024 price review, called on the regulator to monitor and promote how water companies can sup- port the development of a well-functioning business retail market. MOSL, which worked with Defra while it developed the statement, was pleased to see the ‹ nal version retained "driving markets to deliver for customers" as one of the four stra- tegic priorities for Ofwat. A MOSL spokesperson says: "We wel- come the increased focus outlined in the ‹ nal statement on tackling the structural challenges in the non-household water mar- ket, as well as the frictions that have been identi‹ ed over the past ‹ ve years of market operation." They say it is essential that the market "promotes competition, enables innova- tion and delivers bene‹ ts to non-household customers". "We believe Ofwat has a crucial role (such as through the upcoming PR24 price control period and the review of the Retail Exit Code price caps) to ensure the market is able to thrive and deliver value for all customers and improved environmental outcomes." Ofwat adds: "We consider [the SPS] to be consistent with our vision of a business retail market that creates value for customers, society and the environment. Publication of the SPS is also very timely as it provides helpful direction to the newly created Strate- gic Panel. "We are also pleased it highlights that further improvements to the market cannot be made by Ofwat alone and that all market participants have a role to play." Retailers have shown broad support for the SPS, with James Cleave, chief ‹ nancial o" cer at Everž ow, stating: "The crucial thing will ultimately be how it gets implemented; how and where speci‹ c trade-o s will be managed when looking at key decisions." He explains that for Everž ow, the main issues are environmental, emphasising how the non-household market can contribute to targets to reduce consumption, improve e" - ciency and achieve net zero emissions. Cleave says putting the environment

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