Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/762954
UTILITY WEEK | 16TH - 22ND DECEMBER 2016 | 9 The year in review Opinion MOSL's review of the year "It's been an extraordinary year as the water industry prepares for competition." T his past year has been an extraordinary one for MOSL and the water industry as the months have counted down ever quicker towards the opening of the competitive water market. With the exception of the market opening itself, 2016 has included every other major stage of the programme – design, build and user testing. We're now two months into the shadow market phase and companies are busy testing their processes and proce- dures as if the market were already open. When you consider the scale of the challenges ahead of us at the beginning of the year, we are pleased to be ending 2016 in such good shape. The central market operating system (CMOS), which will be at the heart of the new market, now contains the full market data set and recently processed its two millionth transaction. One of the CMOS's central functions is to calculate the charges between wholesalers and retailers, so we're pleased that partici- pants' feedback about its accuracy has been very positive to date. There is still a lot of work to do before the market opens, but as we look ahead to the third stage of Defra's assurance process we can say with confidence that from a technical perspective the market will be able to open, subject to the secretary of state's decision. Of course, the year hasn't been without its challenges – far from it. Indeed, in April we decided to change the MOSL programme status from "amber" to "red" to ramp up our response to a series of challenges that were, collectively, threatening our next key mile- stone. We have always aimed to be transparent with our members, so we were quick to explain what we were doing, why we were doing it and how we were working to minimise our impact on their programmes. We are conscious that we are just one part of a much wider techni- cal, operational and cultural change process. It was a reminder, if one were necessary, of the complexity of what we are doing and the extremely tight timescales we are work- ing to. However, thanks to an enormous effort by the team, our partners and the industry, the shadow market began on time at the start of October. For MOSL the opening of the shadow market was not just another milestone, it was in many ways the milestone. It was the point at which the focus shied from MOSL's readiness to participants' and we moved into "operational mode" to help make the transition into the live market as seamless as possible. In the meantime, we have another milestone before the end of the year. On 15 December our members are due to vote on our business plan for 2017/18, which sets out our vision for how we believe we can best balance the needs of the market with the wants of those participating in it. As I said at the outset, it has been an extraordinary year for MOSL and the industry and I would like to thank our members for all their support and input. Their engagement has been exemplary. Ben Jeffs, chief executive, MOSL The big six cannot be trusted to help consumers engage in the market because their business model rests on keeping their loyal customers in the dark about better offers with new- customer only offers, "exclusive" collective switches and infre- quent and opaque customer communication. That is why we are seeking a stronger intervention from government. We believe the big six should be forced to switch their loyal customers – those who have been on a standard variable tariff for three, five or even ten years or more – auto- matically to cheaper tariffs. This would not only imme- diately save consumers money, eroding some of that £2 billion of overcharging identified by the CMA, it would transform the market. Knowing disengaged custom- ers were no longer "inert" would stop the big six overcharging them. And, unable to over- charge their loyal customers, they would have to become more efficient businesses. The government has prom- ised to bring forward further proposals to combat energy overcharging by spring 2017. We sincerely hope that 2017 pro- vides better news to the millions of households who pay more than they should. Ed Kamm, UK managing director, First Utility This year the water sector also witnessed a series of joint ventures, including that between Severn Trent and United Utilities. The two companies merged their business retail arms to create Water Plus, which has the largest market share with about 400,000 customer accounts. Meanwhile, Pennon announced it is join- ing forces with South Staffordshire Group to create the fourth-largest retailer in the busi- ness market. And in other water consolida- tion news, an unexpected bidding war broke out between Severn Trent and investment firm Ancala – both of which are aer water- only company Dee Valley. Several of the incumbent water compa- nies have rebranded their business retail arms, led by Northumbrian Water which rebranded as Wave. Some new entrants have emerged, such as the Water Retail Company, headed by Lord Redesdale, with support from the Energy Managers Association. And, of course, one of the biggest mile- stones of the year has been the successful opening of the shadow market, which has only suffered from a few minor teething problems. continued p10 13% Market share of independent energy retailers (Q2 2016). 100 days until the non- domestic water retail market opens. 61% The stake National Grid has sold in its gas distribution business. 6 Number of days of the summer the UK was coal-free. NUMBER CRUNCHING 24 June Friday 24 June 2016 will be remembered as a significant day, but for the utilities, it was bigger than for others. Not only was the shock result of the referendum signalling the UK's desire to leave the EU, but it was also the day the two-year CMA probe into the energy market drew to a close, and when Southern Water announced its intent to exit the non- household water retail market. The tectonic plates of the utility market barely shi, but there were seismic changes on that day.