Utility Week

UTILITY Week 17th March 2017

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6 | 17TH - 23RD MARCH 2017 | UTILITY WEEK Water brokers Analysis T he brokers are coming. "Hundreds, if not thousands" look set to capitalise on the water market when it opens, according to Business Stream chief executive Johanna Dow. Anecdotal evidence suggests as many as two-thirds of transactions in the non-house- hold water retail market could be interme- diated. Energy brokers are set to move into water in force – but to succeed in a market with such thin margins, these brokers must offer efficiency advice and negotiating skills rather than just a simple transactional ser- vice. What is more, as water deregulation approaches, a row has broken out over the place of brokers in the market, with some saying they could introduce "Flash Harry" business tactics that put customers at risk. Undeniably, water market deregulation will be a significant opportunity for brokers, and many of those already in the energy market look set to move into water, or risk leaving themselves open to their competitors offering a complete utility service. Brokers will aim to offer an "expert eye" for customers, and will be able to compare proposals on a like-for-like basis to make sure customers make the right choice of retailer. As this is a new, immature market, buyers may not have the confidence to take on the task, so brokers will add "real value", argues Orchard Energy commercial water manager Chris Quinn. However, if a broker's sole focus is on pro- curement it is unlikely to be successful, for the first few years at least. "If you are more concerned about holistic costs, and there- fore the consumption side and all the other services that go around it – for example, the forecasting and budgeting – then I think there is significant opportunity for brokers to play a valuable role for customers in helping them engage with that market," says Inenco chief commercial officer Dave Cockshott. Some have gone as far as to claim that the traditional brokering model has "no place" in the water market. Waterscan managing director Neil Pendle told Utility Week back in January that he did not believe the brokering model was the best one for the non-domestic water market. In Scotland, many businesses have achieved "impressive" cost savings – both through switching and by focusing on water consumption reduction – since that market opened in 2008. However, if margins are as low as projected in the English market, the benefits are going to have to be about more than just the ability to switch, and brokers will have a duty to help project this message. It is imperative that customers are offered more than merely a switching service. Grand Union Water managing director Peter Sceats agrees with this mantra. He does not see much of a role for exclusively running tenders, and says the successful water services broker needs to be active on bill validation and audit side as well. "Brokers need to be full service rather than just component part focused." And Cockshott says water has become the "forgotten utility", because proportionally The risk and reward of brokers As preparations ramp up for the opening of the non-domestic retail water market on 1 April, brokers are anticipating a boom in business. Utility Week provides an in-depth guide of the utility broker market as it stands, and considers how it is likely to change after market opening. THE SCOTTISH MARKET MARGIN Retail margins in the English water market are predicted to be tighter than they were in Scotland when the market opened there. The average margin in Scottish market at the beginning was 10%, rising to 26% today. The predicted margin in England is 6%. This means the benefits for customers must be about more than just switching for discounts. FINANCIAL SAVINGS Since the Scottish market opened in 2008, the country's largest retailer, Business Stream, says it has saved customers millions of pounds in efficiency savings and reduced energy costs. 10% 26% 6% Total estimated savings £160m £53m £99m £7m of which… Discounts Efficiency savings Energy savings WATER SAVING 24 billion litres Amount by which Business Stream custom- ers have reduced their water usage since the market opened

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