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UTILITY Week 5th May 2017

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UTILITY WEEK | 5TH - 11TH MAY 2017 | 19 Policy & Regulation Analysis T he non-domestic water market has already seen a plethora of multi-utility offerings announced, including Busi- ness Stream teaming up with Utilitywise and Veolia to offer customers a complete "end-to- end" solution for all their water, energy and waste needs. Additionally, Anglian Water Business has announced a partnership with Corona Energy to offer business customers a tri-utility supply of water, gas and electric- ity. And another retailer tells Utility Week it plans to announce a multi-utility offering of its own in the not-too-distant future. Utilities service provider Gemserv pub- lished a research paper in February which suggested that, if trends towards multi-utility offerings build momentum, this could raise "fundamental questions" about the crea- tion of a multi-utility regulator. The paper observed that the different regulatory obli- gations and rules overseen by Ofwat and Ofgem could cause difficulties. For instance, regulatory overlaps or gaps could lead to lapses in the provision of protection for cus- tomers who opt for bundled utility deals. Now, Ascendancy Water managing direc- tor Charles Vincent says the "unstoppable momentum" towards multi-utility provision – gas, electricity and water – means that combining the regulation of multi-utility retail will be "essential" for customer protec- tion, especially with a move to household water competition on the cards. "Whether the same is true on the wholesale side is less clear until government plans for a wholesale water market are clearer," he adds. Some market participants are tentatively supportive of the introduction of a multi-util- ity regulator. SES Business Water managing director Giuseppe Di Vita says the company would back consideration of a multi-utility regulator for both the energy and business water market, "providing any change is aimed at delivering consistency across utili- ties while ensuring continuity for consum- ers and suppliers". He says that, while there may be common challenges across energy and water, there are "significant differences" in other areas, although he insists that any multi-utility regulator would "still need to retain specialism in each marketplace to be effective". Anglian Water Business managing direc- tor Bob Wilson agrees that multi-utility offer- ings have been increasing recently and says the trend is "here to stay". "To this end, we don't rule out the possibility of a multi-utility regulator being created in future." Different markets However, not all market participants agree that a multi-utility regulator would be the best solution, primarily because of the differ- ences between the energy and water sectors. Everflow customer services director Josh Gill says he is "not convinced" it would work for price-setting because the methodology used for the two markets is "inevitably going to be completely different". "There are signifi- cantly different risks and opportunities in each sector – energy and water." Waterscan managing director Neil Pendle says that, while there are some benefits from a single utility regulator, particularly around the common customer-facing activities such as switching and billing, there are also "sig- nificant differences" in the way the water sec- tor is regulated and how the market operates. Multi-utility regulation At the dawn of the open water retail market, the move towards more multi-utility offerings looks inevitable. So is a multi-utility regulator the best way forward too? Lois Vallely reports "It makes a great deal of sense for the regulators to work together and agree some common ground which would give consist- ency to the customer experience across util- ity service providers," he tells Utility Week. "But there is no evidence that a single reg- ulator would deliver better results at this stage." Castle Water, which has been active in the Scottish market for some time, insists comparison between regulators is needed to keep the pressure on them to perform well. The company's chief executive, John Reyn- olds, says: "Regulators need to have pres- sure on them through the ability of regulated companies and government to compare their performance, and therefore I'd be opposed to creating a super-regulator." He did, however, suggest that a single regulator may work in a region like Scotland, which is smaller economically – similar to the Utility Regulator in Northern Ireland, which regulates the electricity, gas and water sectors. "I think there would be a really interesting argument for a super-regulator in Scotland, which you could compare the per- formance of with the separate regulators in England," he says. "And you could add rail to that as well if you wanted to." Ofwat says the future structure of regula- tion "remains a question for government", which is currently bound by the rules of pur- dah and unable to make any announcements until the general election on 8 June. Before a decision can be made on whether a multi-utility regulator should be created, the water market needs to be allowed to settle down. There are already lots of new systems and processes for companies to get to grips with, and NWG Business managing director Lucy Darch insists companies need to understand the strategy for the household market – another decision which will now not be announced until aer the purdah period. "In time, one regulator may be opti- mal if the water market fully deregulates and it would be more cost-effective," says Darch. "But we would see the timeline as aer 2020." Regulator collaboration The United Kingdom Regulators Network (UKRN) is an organisation formed of 13 of the UK's sectoral regulators. It was launched in March 2014. The UKRN says it aims to "encourage and build upon a culture of col- laboration" across the network. It does this through a programme of work that seeks out opportunities for co-operation between mem- bers in a "flexible and efficient way". Members of the UKRN are: the Civil Avia- tion Authority (CAA), the Financial Conduct Authority (FCA), Office of Communications (Ofcom), the Office of Gas and Electricity Markets (Ofgem), Office of Water Regulation (Ofwat), the Office of Rail Regulation (ORR) and the Utility Regulator. Monitor and the Water Industry Commission for Scotland (WICS) are also participating as observers.

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