Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/754587
UTILITY WEEK | 25TH NOVEMBER - 1ST DECEMBER 2016 | 23 Operations & Assets Market view I n 2017, water market opening means a water company's biggest customers will cease to be multi-site retailers, industrial operations or even the public sector. Its big- gest customers will be water retailers. On the flip-side, the wholesalers become by far the retailers' biggest suppliers. This new relationship must be carefully managed like any other major customer/ supplier relationship to ensure it remains effective and win-win. Like most areas of business, the rela- tionship with retailers is also a relation- ship between individuals. Wholesalers must ensure they have the right account managers in place to deal with their differ- ent customer segments. While initially the incumbent retailer may be the only show in town, it is likely that other retailers will quickly need intensive management because customer switching tends to identify issues that need intervention far more than day-to- day incumbent operations. Considerations should include the segmentation of account managers – such as one for the incumbent and another for new entrants – with ongo- ing reviews to ensure this is adjusted as the market grows. Having clear lines of communication and escalation is essential to an effective operation. It is likely that as issues arise, retailers will start to use whatever lines of communication work. This oen means a mess of direct communication between various departments and managers. Ensur- ing that the correct lines of communication are implemented and observed, including defined lines of escalation, will ensure that commutation is efficient and productive. The Scottish market has seen two retail- ers go bust. While the default wholesaler/ retailer agreements contain provisions that should ensure this does not result in finan- cial loss to any wholesaler, these provisions only work if the strict timelines are followed. If wholesalers delay instigating the formal debt proceedings in the market, there can be periods for which money owed may not be recoverable. To make sure this does not hap- pen, strict debt management controls should be implemented and followed immediately following any failure to pay by any retailer. For wholesale areas where there is a zero or reduced charge for vacant (void) prop- erties, the retailer controls the settlement charging (and thus the wholesaler's revenue) for properties by changing the vacant flag in the market. To a lesser but still signifi- cant extent this can also be done with meter reads. Here, wholesalers need to ensure they have processes in place that protect against the two scenarios that can cause this: poor retailer performance; and fraudulent retailer behaviour. The cornerstone of managing this risk is effective settlement data analysis and audit. Historic occupancy and meter reading data should be used to ensure there is no sig- nificant deviation of behaviour aer market opening. This must be done on a retailer-by- retailer basis to identify an individual retailer (especially the smaller ones) behaviour. Fol- lowing on from this, a level of desk and field- based audit, based on a risk profile derived from the data analysis, will ensure that the revenues due are charged for. Key to this audit should be establishing that occupancy dates are accurate and that wholesalers are not missing out on periods of occupancy between move-in dates and identification by the retailer. Operational performance Poor operational performance (or behaviour) by a retailer can have a significant impact on a wholesaler. With almost all customer contact coming via the retailer, if their per- formance is poor then the wholesaler can be significantly impacted. Notification of inci- dents are now the responsibility of retailers, and if they do not conduct this effectively it can negatively affect the wholesale team's ability to conduct repairs, etc. In addition, frustrated customers may try to receive service from the wholesaler directly, something they are not scaled to do. Retailers with little or no water industry expe- rience or with particular focuses may also cause issues by demanding services inap- propriately. Examples could include request- ing verification of services on all properties transferred to them or failing to investigate potential de-registrations properly before submitting them. This can cause operational stress on the wholesaler and impact service levels to all retailers. The key to resolving this relates back to the relationship with the retailer discussed above and having sufficient bandwidth to support retailers with educa- tion and support if needed. This relationship is so critical to the suc- cessful operation of the market that sig- nificant focus must be given to it by the wholesale team. Le alone it is likely to spiral out of control, causing financial and operational impacts for both sides. Charles Vincent, managing director, Ascendancy Water In our next article, we will look at whole- saler management from the perspective of a retailer. Relationship counselling The relationship between water suppliers and retailers will be key to the success of the competitive water market – and essential to that is effective communications, says Charles Vincent. Water competition numbers • Since 1 April 2008, all 130,000 businesses, public sector, charitable and not-for-profit organisations in Scotland have been able to choose their water and wastewater provider. • The Scottish non-domestic market has annual gross market value of £330 million. • From April 2017, over 1.2 million eligible businesses and other non-household cus- tomers in England will be able to choose their supplier of water and wastewater retail services. • This will expand the current £540 million-a- year water retail market to one worth £2.5 billion • £1.8 billion of benefits from upstream com- petition in England have been forecast. • The financial benefits from opening the English market to competition could be worth £2.9 billion over 30 years. • Domestic customers in England could save £8 a year on their water bill due to competition.