Water & Wastewater Treatment

8 | JANUARY 2016 | WWT | www.wwtonline.co.uk Comment How will competition shake up the players in the water market? and there is little information available about the structure of market conditions for formal requests of interest to be made. And as licences cannot be applied for until April 2016 to supply in 2017, Ofwat will no doubt be expecting more interest once workshops scheduled for February and March have been held. The government announced in November that it has asked Ofwat to carry out a cost- benefit analysis on allowing households to choose their supplier. The plan is to have competition in place by the end of the current parliament in 2020. I believe this would encourage more entrants into the market. It will be interesting to see how a competitive market in England and Wales will develop. For example, will it follow the gas and electricity market pattern, with an initial flurry of new entrants that slowly fall by the wayside or join together until there are only WASCs or WOCs, as well as a small number of independent suppliers? The Consumer Council for Water (CCW) has completed some research on what will influence non-retail customers to swap companies, which includes factors such as price, product/service, reduced consumption and Corporate Social Responsibility. Yet evidence from the energy market shows that many customers remain on their original tariff even if it is very uneconomical. And there is still more detail to come about how the swapping process will actually work. It will be interesting to see if competition accelerates the development of more integrated networks. Every market has an ethical or green supplier promising to source their product from a sustainable source. Yet will this be possible, for example, in the South East where water is already under stress? If the networks were more conjoined, water could be more realistically transported from water-plentiful areas and supplied to water-stressed areas. Increased connectivity could also improve investment at treatment works. Retailers would also be able to buy water from the most efficient or 'cleanest' suppliers, forcing all companies to invest in further infrastructure improvements. The recent announcement about household competition has the potential to entice other new entrants to the market. However, there is likely to be only a small margin and therefore a small profit per residential customer when compared to large industrial and commercial users. Will it be either beneficial or necessary for households to have a water meter to change supplier? A—er all, there seems little benefit to either the customer or the supplier if the only change is to billing and customer service. The arrival of new entrants to the market has the potential to provide a significant shake-up to the incumbents. Although it is not yet clear how the market will operate once competition has been introduced, one thing is certain: the water market in England and Wales will go through significant changes in the next few years. Ian Small AssociATe DiRecToR, WATeR AecoM Many different types of company might thrive in a water market opened to competition, but few new entrants have emerged so far A s competition in the water industry grows, I have started to wonder about the type of companies likely to be operating in the evolving marketplace in England and Wales in the near future. Discussions at industry events suggest that it is not yet clear who will provide the biggest shake-up to the industry. However, looking at what has happened in the already competitive market in Scotland does give pointers towards several new groups of companies that may be interested in entering the market as competition is introduced. These appear to include: a) small companies set up by groups of employees leaving big companies to go it alone as start-ups to service specific clients; b) technology companies that can provide significant efficiency savings to their potential customers; c) pension and infrastructure funds that have a profile of long-term liabilities requiring a matching long- term income stream, which fit very well with regulated industries; d) international service providers looking to expand; and e) other utility providers wanting to provide a joined-up service, such as gas and electricity companies. Yet at the time of writing, only a very small number of potential new entrants to the market had submitted written enquiries to Ofwat. Of course the process is still in the early stages

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