Utility Week

UtilityWeek 5th August 2016

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

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Page 18 of 31

Customers This week Alarm bells ring for water retail timetable Delay, disruption or vagueness will sink exacting programme for opening of water retail market The programme for water retail market opening is under threat and the sector must "act urgently" to address major issues which could jeopardise its success. An independent group set up by Ofwat to review the pro- gramme said the timetable was "exacting in the extreme". It said "a number of major tasks still lie ahead", and the efforts of a large number of participants must be "marshalled and co-ordinated". In its second review of retail market opening, pub- lished on 28 July, the team said "a number of uncertain- ties" remain. It moved the programme to 'amber/red' status, but said "stakeholders appear well aware of the level of challenge they face and are preparing seriously to address it". It continued: "The focus on the delivery of the central systems has dominated the programme for much of its life; it continues to be demanding but attention is now moving to the readiness of market participants. "There is still much to be done in this area. The time- table has little if any flexibility to accommodate delay, disruption or lack of clarity in any of these areas and there is no contingency plan. These are areas of major programme risk." Ofwat director for market opening Adam Cooper wrote to the group in response to the report, to provide assurance that the programme is on track, and to outline what has been done to address the issues and uncertain- ties. LV energy SSE prepayment switching probe Ofgem has launched an inves- tigation into SSE's prepayment meter processes. The probe is a result of concerns about its approach to switching customers into prepayment tariffs, particularly those in potentially vulnerable situations. The regulator will examine whether SSE breached its stand- ards of conduct, which requires it to offer appropriate informa- tion and ensure consumers' ability to pay when suggesting alternative payment methods. An SSE spokesperson said: "We are committed to treating all our customers fairly and will be co-operating fully with Ofgem's investigation into this historic issue." water Portsmouth Water top for satisfaction For the second year in a row, Portsmouth Water has come out top for handling customer queries and resolving issues. The water-only company achieved a score of 4.57 out of 5 for customer satisfaction, in Ofwat's 2015/16 report. Wessex Water was ranked second with a score of 4.52, and Bournemouth Water came third with 4.46. At the other end of the scale, Southern Water was bot- tom with 3.97, and Thames just above it with a score of 4.10. Ofwat reported a "positive trend", with average customer satisfaction rising to 4.33 com- pared to 4.24 the previous year. However, customers said better communication and a quicker response from water companies were the "key issues" in greater satisfaction. water Business retail 'too costly' for Thames Thames Water has said that remaining in the non-household retail market and offering national coverage would cost the company too much. "We would have to incur additional costs on top of our existing cost base to be effective nationally," the company's chief financial officer Stuart Siddall said. He added that the company already had concerns that its cost-to-serve was much higher than Ofwat thought it should be. "When we started to look at the market and the options, we concluded that our costs were high relative to others, and par- ticularly to new entrants, which were focused retailers," he said. Thames announced on 18 July that it would exit the busi- ness retail market and sell its non-household customer base to Scottish retailer Castle Water. See analysis, page 21. Programme moved to amber/red status I am the customer Tony Smith "The energy sector offers a stark warning for water" Could water competition deliver a better deal for households in England that comes close to meeting their expectations? The recent publication of Ofwat's emerging findings confirmed two things we already know: customers like the idea of choice but, crucially, have little interest in small savings. So could a retail water market offer- ing bill reductions of around £10 satisfy customers' appetite to save money – even with the potential for bundling services? customer complaints low, but service levels high? We can see real advantages in allowing the non-household market in England time to estab- lish itself before pressing ahead with household competition. This would give the industry time to look at switching and renegotiating rates and help us all to gain a clearer understand- ing of whether competition can avoid disappointing households. Tony Smith, chief executive, Consumer Council for Water The energy sector might provide a stark warning for water. Switching rates in gas and electricity markets have run at around 12 to 18 per cent, despite potentially much larger bill reductions than water. The other significant con- sideration is service. Before we press into these uncharted waters we also need to be sure competition will not put at risk customers' high levels of satisfaction with their water (93 per cent) and sewerage services (91 per cent). Would potentially very low switching rates in a household water market put enough competitive pressure on retailers to keep prices and UtILIty weeK | 5th - 11th aUgUst 2016 | 19

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