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UTILITY WEEK | 20TH - 26TH OCTOBER 2017 | 25 Customers Analysis A er years of effort, water competition has finally arrived in England. From April, 1.2 million non-household cus- tomers became eligible to choose their pre- ferred supplier – many have already done so. Among those 1.2 million customers are a vast number of businesses as well as charities and public sector organisations. For almost a decade, non-household customers in Scotland have had a similar choice, with Business Stream being to the fore in rolling out water sector competition north of the border. To a certain extent, the current process replicates that of the electricity supply indus- try in 1994, when organisations with demand of between 100kW and 1MW were permitted to change supplier. Much of the activity in the non-household water market is geared towards defending the existing customer base, and deterring larger customers from being snapped up by a new provider. Significantly, several of the ten water com- panies have shown relatively little interest in launching an aggressive strategy to win new customers; they presumably recognise that any profits will be modest, even with three- year contracts becoming the industry norm. Instead, their over-riding priority is the next periodic review, which will apply from April 2020. Already, there is real nervousness about its outcome, with Ofwat talking of a tougher review than previously. Indications that Ofwat's next Weighted Average Cost of Capital (Wacc) percent- age figure might even be prefixed with a 2 – rather than with a 3 – are alarming water company investors. Many expect a similar outcome to the 2014/15 review – with about a 3.6 per cent Wacc – assuming no major hikes in interest rates. However, some water companies have cranked up their efforts to secure new customers, with the Severn Trent/United Utilities joint venture, the Stoke-based Water Plus, becoming the largest water supplier in England. Water Plus has now secured multi-site deals with the hotel group Radisson and three leading grocers – Tesco, Sainsbury's and the Co-op. It has also signed a contract with the Caravan and Motorhome Club, covering more than 130 sites, as well as becoming preferred supplier to the David Lloyd fitness centres, which operate on 84 different sites. But the Water Plus deal with Kwik Fit merits particular comment since the latter has some 830 different sites, of which almost 750 are in England. Previously, Kwik Fit had to deal with 22 separate suppliers for billing purposes. Now, all this is to be handled by Water Plus. Of the other eight privatised water companies, both Thames and Southern have already sold off their non-household customer base. Otherwise, it is only Anglian and North- umbrian that have shown any real interest in coming to the water competition party. Anglian has joined with Northumbrian to launch Wave, which continues to attract new customers. Already signed up is the rapidly expanding Warrington-based bookmaker Betfred, which bought the Tote: material savings have already been delivered. Holland & Barrett, a leading health shop chain, has become a Wave customer: it trades from more than 450 sites. And Pure Gym, a fitness chain with 180 sites, has also signed a contract with Wave. Recently, an innovative deal was con- cluded with Malmaison and Hotel du Vin across its luxury boutique hotel portfolio in the UK. In Scotland, Business Stream, a subsidi- ary of the publicly owned Scottish Water, has been at the forefront of water competition. Indeed, its chief executive Jo Dow empha- sised the progress that has been made: "We're pleased with the volume of new busi- ness we've secured, including £100 million in new customer contracts, and an extremely healthy pipeline." Among its most high-profile wins is that of Asda, one of the UK's big four grocers, with nearly 100 supermarkets in Scotland. Department store Debenhams is also a Business Stream customer. Intriguingly, too, Business Stream has gone down the airport route, emulating London Electricity in the mid-1990s, which – because of its Heathrow expertise – controversially agreed a supply deal with Gatwick Airport, formerly a prized Seeboard customer. In Business Stream's case, it provides water services to Aberdeen, Glasgow and Southampton airports – a portfolio that may well expand. Perhaps even Heathrow may eventually end up in the Business Stream mix. While Yorkshire seems to have lost inter- est in Three Sixty – it exited recently – another notable development has been that of brewer and pubs retailer Greene King, which currently has a market capitalisation of almost £1.7 billion. The Bury St Edmunds-based Greene King has taken advantage of the new provi- sions and has secured for itself – with the participation of leading water consultancy Waterscan – a water and sewerage self- supply licence. Consequently, it can self-supply its vast nationwide pub estate. In the medium term, it will be interesting to analyse the annual savings that accrue from this initiative. Undoubtedly, water competition is arriv- ing, aer an immensely prolonged gestation period. Whether it ever reaches – in sizeable numbers – the UK retail base remains to be seen. Nigel Hawkins, director, Nigel Hawkins Associates Majors move to multi-sites While the next periodic review is the over-riding priority for some water companies, others have cranked up their efforts to secure new customers in the non-household market, says Nigel Hawkins. Significantly, several of the ten water companies have shown relatively little interest in launching an aggressive strategy to win new customers; they presumably recognise that any profits will be modest, even with three-year contracts becoming the industry norm"