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UTILITY WEEK | 21sT - 27Th NovEmbEr 2014 | 15 Policy & Regulation The project has had a difficult birth. Ide- ally, many of the decisions still outstanding about market structure would have been taken by now, but turmoil at the nascent market operator has held back progress. Open Water was initially set up as an arm's length, and private, company by Ofwat to run the process of creating the non- domestic water market in England. It was also expected to potentially go on to become the market operator. Its funding came from voluntary donations from water companies, to pay for the back office services needed to set up the market – such as the market codes. Public disagreement In February this year, programme director Keith Fowler stood down from the organisa- tion, and the board spent months looking for a permanent replacement. The post was never filled. Consultant John Parsonage of PA Consult- ing was appointed interim chief executive when Fowler stepped down and remains in the role today. But in August Ofwat made the decision to "wind down" Open Water. The decision was prompted by the govern- ment's classification of it as a public body – an unexpected move by the Treasury, which stymied Ofwat's plans To the outside observer, the Open Water programme at this stage appeared rudderless and far behind schedule. Yet the industry is united in its insistence that this is not so. Sutherland insists the project is on course. The Open Water Programme has been hold- ing regular workshops with water company chief executives and, says Sutherland, has been "going like the proverbial steam train". The water company bosses have been working through the rules and regulations of the Scottish market model "page by page" and translating them into ones that will work for England. "There's everything from minor tweak- ing to some quite major issues that are being addressed and changed," says Sutherland. He is in fact complimentary about the work undertaken by water company chief executives, describing them as "fantastic" for the work they have done in directing the programme. However, despite this "noble" work by water company bosses, the programme is still facing problems – in particular to do with the procurement of the market opera- tor (comparable to market operator Elexon in the electricity sector). Sutherland raises concerns over the pro- curement process for the market operator, and how Open Water's status as a public company will fit in with the "accelerated timeframe" needed to ensure the system is set up and running by 1 October 2015, when the retailers will plug in and test the system. He says that if public procurement rules are followed – and the longer timeframe this then requires – "it is quite difficult to see how we can procure to that timeline". Therefore, Sutherland says the "working assumption" is that a private model will be used, allowing the market operator to be put in place, although he thinks it is a "fairly material risk to the whole programme at the moment: that's the one thing that keeps me worried". Back on track? The radical overhaul required of Ofwat to change Open Water's status from a private body to a public body has put the design and build phases of the programme on hold. And on hold until the market operator has been appointed – following either public or private procurement guidelines. This concern over potential delays is shared by the water companies. Southall says they are all reliant on Open Water getting the market operator procure- ment process completed on time, so that they can get their houses in order and ade- quately prepare for April 2017 – and indeed 1 October 2016 and the initial linking up to the newly created market system. "We would hope that the regulator and the programme can get their act together and get things agreed and signed off." He adds that Thames, by creating TWCS, has made moves to prepare itself for the retail market, setting up a separate entity with "appropriate Chinese walls in place" and adhering to Ofwat's "four box model", whereby the incumbents will structure their businesses with wholesale water and waste- water businesses, and retail household and non-household businesses. However, this means nothing until the market operator has been put in place because "we can only do what we can do in responding to the central market design". Southall adds: "We are dependent on the Open Water programme to define the inter- faces and how the market rules work." Until that is complete, the water retail market is unlikely to kick off in England until aer April 2017, even if that is the date in the Water Act. And in the Water Act there is yet another challenge for the industry. For almost the entire passage of the Bill, the government repeatedly stated that retail exit would not be allowed. However, by the time the Water Bill had almost completed its passage through the 2015 2016 2017 14 May 2014: Water Act – with the provision for retail competition – is passed 6 August 2014: Ofwat announces plans to wind down Open Water Market Ltd December 2014: Procurement for the market operator "needs to be" launched April 2015: Market operator should be contracted September 2015: System build to start 1 October 2016: systems to be established and ready for testing April 2017: English non-domestic market opens to competition He says there are "three or four" compa- nies that have started from scratch, with no history in the water sector, that have begun trading in Scotland, and they could enter the English market in 2017. However, Southall does add: "There are no major brands or players from other markets that have moved in yet. "I think some of the energy companies will, but they will probably see what happens and wait before they get involved." Indeed, independent generator and sup- plier Ecotricity says it looked at entering the water sector, but for the foreseeable future at least it has shelved any plans because it currently has its "hands full with the energy market". The multi-utility model, something Utility Warehouse has achieved in the energy and telecoms space, is predicted to be the way forward, with non-water companies tapping into the sector and offering customers a one- supplier-fits-all solution. Ofwat's senior director for customers and casework, Richard Khaldi, says: "I think it's likely at some point that we will end up in a world with water, gas and electricity being sold by single retailers."