Utility Week

UTILITY Week 17th March 2017

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UTILITY WEEK | 17TH - 23RD MARCH 2017 | 7 Water brokers the spend is not as great as electricity and gas. The opportunity in water, therefore, is more in making sure the customer's account is properly managed. The opening of the market, and the opportunity to be served by one retailer as opposed to several, he argues, will ease the administrative burden on multi- site customers, which are currently faced with multiple bills. There are many different types of bro- ker, both currently operating in the energy market and likely to join the water market. There are those which will offer water as a complementary service alongside an exist- ing energy offering, but for whom water will never become a core activity, such as Inprova Energy. Then there are those which have started up with the purpose of focussing 100 per cent on water services, such as Grand Union Water. The imminent influx of brokers into water has sparked concern about the behaviour of some, which could mar the reputation of the rest and derail consumer trust in a mar- ket that is comparatively well respected. In the energy market, brokers are unregulated and unchecked and this, Sceats argues, has encouraged some of the most "dreadful" cus- tomer service he has ever seen. "I call them Flash Harry business tactics and they are at play in the energy market every single day." He insists that energy brokers "should be and should have been" regulated by Ofgem, and that those looking to enter the water market (so the majority) should be regulated by Ofwat. Ofwat's position Many agree, and water regulator Ofwat itself has called for formal powers to regu- late these third party intermediaries. It says that the involvement of these parties in the business water retail market could provide "many direct benefits" to customers, and support market development by facilitating higher levels of customer engagement and potentially encouraging a multi-utility mar- ket. However, it warns that there is a risk that the activities of some third party inter- mediaries may cause harm to customers, especially small businesses, and insists that formal market regulation will be important in ensuring customers are treated fairly. Whatever happens, it looks inevitable that brokers will be "part of the fabric" of the newly created non-household water retail market and, as Water Plus chief executive Sue Amies-King writes in a blog for Utility Week: "Retailers have a role to play in build- ing knowledge and understanding among the broker community." "Third party intermediaries should be bound by codes of practice approved by utility regulators." T he opening of the non-house- hold water market will result in 1.2 million customers requiring water contracts. Already being in con- tracts for energy, these customers will be familiar with third party intermedi- aries (TPIs) and suppliers competing for their business, and will appreci- ate the advantages of combining all three utilities with one TPI. Existing energy TPIs will wish to consolidate their portfolios and increase market share. Retailers will be determining their position, particularly in their approach to TPIs. TPI activity has been instrumental in shaping the energy landscape, driving competition and stimulating innovation – as attested to by the Competition and Markets Authority (CMA) in its energy market investi- gation. However, the TPI-supplier relationship has not been an easy one, particularly in the early years, with suppliers anxious to ring-fence their existing business, TPIs were oen viewed as a threat. Some suppliers chose to address this by stipulating rules of engagement, thus compromis- ing the TPI's obligation to put their customer first. The supplier-TPI relationship reflects the diversity and range of TPIs that now operate in the market- place, the balance of that relationship being commensurate to the size and influence of the TPI. TPIs have an obligation to put client interests first. However, some must reconcile this with their obligations to shareholders and investors. Ultimately, all busi- nesses exist to generate an income, and TPIs and suppliers will operate in those markets that benefit them. The key difference between energy and water markets is pricing. In water, the price is regulated, whereas in energy there is no such restriction. Water retailers offer a price minus a discount for the TPI-customer; energy suppliers tend to include an upli which represents the customer's commission to the TPI. Even this is simplistic, in that the recent CMA investigation remedies will affect the TPI market, with the rules for switch- ing sites changing dramatically, so influencing the reaction of suppliers. Neither Ofgem nor Ofwat have the powers to directly regulate TPIs. Most suppliers are reluctant to assume this role. In energy, indirect regula- tion takes the form of overarching standards of conduct, which the supplier must ensure is applied by those TPIs they deal with. With more than 50 suppliers operating in the marketplace, making them singularly responsible for the compliance of TPIs is an unwieldy task, not to mention the reciprocal burden this places on the TPI. The employment of regulator- approved codes of practice that recog- nise suppliers' licence responsibilities, and to which all TPIs are bound, would surely be a more sensible prop- osition. The Utilities Intermediaries Association (UIA) code of practice is the only code that covers every aspect of a TPI's business industry-wide, and incorporates independent redress for customers. TPIs signed to this code are listed on the TPI register or accredited members list. The strongest player in the market is the customer, without them the markets would not exist. Custom- ers want to be dealt with fairly and honestly, not be miss-sold to by the manipulation of calls or documents. The UIA continues to lobby for a licence condition causing suppliers to only accept verbal contracts through TPIs where all parts of every conver- sation have been recorded and can be produced in a dispute. It advises customers to make their own record- ings where possible. Customers must be confident in their TPI relationship before signing a letter of authority that allows a TPI to enter into a contract on their behalf. The UIA has compiled advice to customers on how to reach a deci- sion. If retailers, suppliers and TPIs take this advice into account, then the customer will be dealt with honestly and fairly. Opinion Rachael Gladwin, Director, Utilities Intermediaries Association

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