Utility Week

Utility Week 25th October

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

Issue link: https://fhpublishing.uberflip.com/i/199050

Contents of this Issue


Page 5 of 31

Comment Chief executive's view Mark Powles, Business Stream Let's not miss a trick Sensible regulation by Ofwat is the key to ensuring a successful competitive water market in England, one in which customers enjoy the benefits that customers in Scotland have had for years. H aving worked in multiple industries before I joined Business Stream I've been on the inside of some of the biggest industry transformations of recent years. As a result I have a good idea of both the threats and opportunities that are likely to arise when embarking on a competitive water market in England. Over the years, I've worked with and within newly privatised companies faced with switching from being a cost-focused monopoly to a customer-focused retailer, and I've found that, in general, the process is akin to trying to teach an old dog new tricks – in that the attitude and health of the animal will make all the difference. It is my view that success will depend on the attitude and health of England's existing water market. There appears to be the political will for change, and customers have been telling us for years they'd value the kind of choice created by deregulation in Scotland. The English water market has benefited from infrastructure investment to the tune of some £108 billion since privatisation, so the foundations for change appear stable. The critical factor in the success of any newly-competitive market is the willingness of incumbent suppliers to engage with its core principle so customers get a better deal. Clearly the wheels of market reform are starting to turn, although a lot of the detail is yet to be decided. The Water Bill is expected to receive its second reading in Parliament before the end of the year and this should give us a better idea of how the legislation will ultimately be implemented. In my view, the number one issue that must be addressed if the English water market is to be fit for purpose come 2017 is the question of a fair and open marketplace. The benefits of competition in Scotland are clear to see – since market opening, customers have saved more than £35 million through efficiency alone, and have reduced water consumption by more than 16 billion litres. I firmly believe a competitive water market in England presents opportunities for providers across the UK. The Water Bill must create a sound policy framework that 6 | 25th - 31st october 2013 | UTILITY WEEK will create a fair and equitable non-domestic If we don't look after our customers, retail marketplace. The proof will ultimately someone else will. A failure to structure the be in the implementation, which will require market in a way that forces the focus onto leadership and clear guidance from Ofwat. customers risks entrenching existing monopWe now have the PR14 price review under olies and lumping customers with an inherway, which we hope will make it easier to ently dysfunctional menu of providers. achieve transparency around the true cost Simply put, if opening the non-domestic structure of wholesale and retail businesses, retail market is going to be successful, it must which hasn't previously been possible. There put customer interests at the centre. It is still are real concerns that the wholesale charg- not clear why exit provisions have not been ing regime will be too opaque and too com- included in the Bill, and I hope this is not a plex to enable retailers to provide closed discussion because retail accurate price structures to customis an economies of scale business ers, who would then have no confiand not every water company dence in the marketplace. has the desire or resource to be a Without transparency of wholeretailer. Allowing companies to sale pricing, we also run the risk exit would create a more evenlythat, in some areas, the wholesale balanced market without creatand retail parts of an incumbent ing the potential for customers to business could work together to find themselves on day one with eclipse their competitors. This would a sub-par or ninterested retail u leave retailers to disentangle com- A properly provider. plex pricing structures, possibly We were disappointed in across multiple sites and regions, functioning Defra's decision not to require and having to negotiate on cost market separation of retail and wholesale directly with the incumbent. Nego- takes time interests, but that puts real prestiating access to the market with to get right sure on the regulator to ensure more than 20 incumbents would be that in the absence of legal sepaenough to make most would-be retailers run ration, no retailer can benefit from its posifor the hills. Imagine a race where the previ- tion with the wholesaler. That's a condition ous champion is given a head start and can of our licence in Scotland and makes sure take a shorter route than his or her challeng- that customers are insulated against protecers. Not many bookies would take that bet. tionist behaviour from incumbents, while In Scotland, the regulator requires that creating sanctions for breaches. Without Business Stream, as the incumbent, has no the right policing of incumbents, we run the advantage as a result of its unique position risk of creating 21 different markets for each in the market. Access to the market is regu- regional incumbent. lated, not negotiated, so all participants can But we can't rush it. A properly functioncompete from a common foundation. This ing market takes time to get right and we have means we have had to work hard to keep our three and a half years to do it. If we structure customers because entrants to the market the market correctly, incumbents will have have the same wholesale pricing and access plenty of time to get ready for day one. to market data that we do. After all, when customers have a choice My experience as chief executive of Busi- in a competent market, they invite the innoness Stream over the past five years has vation and high levels of customer service proven the merits of this model to me, and that are essential to helping grow and drive I'm strongly of the view that Ofwat should a healthy business. We must not repeat the regulate the English market to ensure com- sins of the past and design a market doomed plete transparency and a level playing field to fail. Customers have a real appetite for for all providers entering the market. change and will not be so forgiving this time.

Articles in this issue

Archives of this issue

view archives of Utility Week - Utility Week 25th October