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24 | 30TH SEPTEMBER - 6TH OCTOBER 2016 | UTILITY WEEK Customers Analysis T he shadow market is one of the biggest steps towards the opening of the non- household water retail market. It is the industry's practice run and not only provides an opportunity to test market systems and processes, but also to test the readiness of participants from both a retail and a whole- sale perspective. Johanna Dow is chief executive of incum- bent Scottish retailer Business Stream, which has been active in the market since it opened in Scotland in 2008. She emphasises that the plan for the shadow market is not to test all the elements of a live competitive mar- ket, but to test real-life conditions "as far as possible". It has not been an easy ride for Market Operator Services Limited (MOSL), the com- pany tasked with delivering and operating the central information systems and pro- cesses that will enable the market to function. In February, the firm made the difficult decision to allocate a "red" status to the market opening programme, indicating that it was in imminent danger of falling off track. The move was required due to "a number of issues" during the first phase of building the central market operating system. Then in July doubts were cast over the success of the entire market opening process when a paper published by an independent group emerged, warning that the timetable was "exacting in the extreme", and saying it had moved the programme to "amber/red" status. Now MOSL insists the programme is back on track and, although it is still on "amber", five companies have successfully uploaded live data to the central system, effectively marking the beginning of the "as live" shadow market period ahead of schedule. "This is a highly complicated and mission-critical programme with multiple customers that we are delivering on time and within budget," a MOSL spokesman tells Utility Week. (See the column from MOSL chief executive Ben Jeffs, on facing page). In a recent Q&A with Utility Week, the managing director of Kelda Group's newly- formed retail business Three Sixty, Robert Marrill, said that in time things will need to change. But, he said, "we've got what we've got. We should make it work to the best of our abilities". "There are bound to be teething troubles as we go through shadow and market open- ing, but until you start playing in it, you don't know what these will be," he added. The shadow market is a chance to iron out any creases in the system, before the real thing. It is important that companies get the switching process right for customers so they do not become disengaged. Dow says it is "crucial" that the sector does not lose sight of the customer during the next six months and warns that "there is still much work to be done to ensure that customers fully understand the choices available to them". The market has seen a flurry of activity in the past six months, starting with Ports- mouth Water's announcement in December 2015 that it would exit. Things really stepped up in March when Severn Trent and United Utilities teamed up in a joint venture – later named Water Plus – and then two large incumbents – Southern Water and Thames Water – announced in quick succession that they would exit. Dow tells Utility Week that, following recent acquisitions and mergers, it would be "useful to assess how the market infra- structure will cope with large-scale transfers of customers, which is unlikely to be stress- tested during shadow market". As we move into shadow operation there is no turning back. No-one is under any illu- sion as to the enormity of the task ahead, and its success depends on the full participa- tion of all involved. Sue Amies-King, chief executive of Water Plus, says the focus will be on "working together through shadow and beyond to get this right for customers". A taste of competition On 3 October the shadow market will open, and water firms will get a taste of what competition looks like. Utility Week asks some major industry players if the process has gone according to plan. "Shadow operation is an important oppor- tunity for industry to test processes and iron out any issues in advance of market opening. "Having learnt from the opening of other markets, one thing we have to get right for customers is the switching experience." "As with any new market and with the complexity of the industry there will inevitably be chal- lenges… I am sure the market will have some issues to overcome as we all gain experience, but I think it's important that as a sector we focus on making the transition to open market work." "The start of the shadow market phase moves the programme further towards the imple- mentation of the enduring market arrangements – in other words the imple- mentation of one of the most significant changes in the water industry for decades." ADAM COOPER, DIRECTOR FOR MARKET OPENING, OFWAT SUE AMIES-KING, CHIEF EXECUTIVE, WATER PLUS ROBERT MARRILL, MANAGING DIRECTOR, THREE SIXTY