Utility Week

UTILITY Week 8th January 2016

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

Issue link: https://fhpublishing.uberflip.com/i/622708

Contents of this Issue


Page 5 of 31

6 | 8TH - 14TH JANUARY 2016 | UTILITY WEEK People & Opinion 2016 will be a pivotal year for the water industry Domestic retail competition in water starts next year, but many crucial decisions will be made in 2016. Chief executive's view Johanna Dow, chief executive, Business Stream D ecisions made in 2016 will be critical to determining the success of the English retail water market. April 2017, when the non- domestic retail water market is due to open, may be the final milestone, but it is really the developments and decisions that will be made in the next 12 months that will determine its eventual success. The first major development to note is the outcome of Ofwat's consultation on retail margins. Our concerns about the limited scope for discounts and lack of incentives for new entrants to the market, given the tight pro- posed margins, are on record already. We would urge that the margins are widened before market opening and hope the consultation will provide the impetus for this to happen. The results of this consultation will then be implemented in the price review, another key development in 2016, with results expected in December. This will, however, leave very little time for water companies to consider the impli- cations for pricing and strategy and we would therefore advocate that the results of the review are announced earlier in the year. Also worth noting is the next gateway review, scheduled for May. This provides an opportu- nity for an independent review of the progress of the reforms and it must be more than a per- functory exercise. It is arguably the last chance to rigorously ana- lyse and address any outstand- ing concerns before market opening. Later in the year, retailers will be able to choose to exit the market. Ofwat will be consulting on and publishing the retail exit code during the first quarter of the year and water compa- nies will be able to apply to exit from October. Given this is rela- tively close to market opening, it is essential that there is clar- ity on how this will operate in practice to avoid any disruption for customers. One of the biggest milestones of the year, of course, will be shadow operation of the mar- ket, which is expected in Octo- ber. Throughout the year and in the lead-up to shadow opening, the big focus must be on market readiness and ensuring the data is complete and accurate. Then, in October, all market data will be uploaded into the central sys- tem. This will be the first time anyone has been able to view the full list of eligible customers and the services they receive. This will help inform water compa- nies' decisions on strategy and pricing, and allow participants to approach customers with offers so that they're ready to switch in April. We're expecting Defra to con- firm very early in 2017 whether or not the market will open on time but, of course, we can't wait until then to prepare, so all efforts must continue on the assumption that it will. Finally, one consistent theme through the whole of 2016 must be customer engagement. It is vital that the industry, Ofwat, and the UK government ensure that customers are aware of what the changes entail and what they mean for them. The market is opening in order to deliver improved choice and better value for customers. A measure of success for the reforms will be the extent to which this is under- stood by customers in advance of the market opening – and experienced by customers once the market opens. "We are very sorry about what has happened and that is why we have agreed this significant package of customer redress" Simon Stacey, managing director, domestic markets, Npower, on the £26 million redress package the company has been ordered to pay by Ofgem for poor customer service standards.

Articles in this issue

Archives of this issue

view archives of Utility Week - UTILITY Week 8th January 2016