Utility Week

8 | 10TH - 16TH NOVEMBER 2017 | UTILITY WEEK Policy & Regulation Making the market work for everyone Low margins and complexity are holding back activity in the competitive water market. Chief executive's view Johanna Dow, chief executive, Business Stream S even months on since market opening, and the early signs are encourag- ing with more than 61,000 cus- tomers already opting to switch. If you look a little closer at the data, however, it is clear that most switching has been driven by customers looking to con- solidate, either from multiple suppliers to a single retailer, or customers choosing to consoli- date their water and waste ser- vices with a single supplier. Now it may be that custom- ers are getting a better deal from their existing supplier, in which case great, but I suspect that most customers aren't yet access- ing the benefits they should and if that is the case, then we need to work harder to ensure the market works for all customers, not just the big ones. For those customers looking to switch, we need to ensure the switching process is as seamless as possible and that their initial experiences with the new market are positive. Our early experi- ences are certainly highlighting some issues that are having a direct impact on customers that we as an industry need to iron out. We've been fortunate to secure a number of national contracts with large multi-site organisations that have sites across every wholesaler region, but these wins have highlighted the level of complexity that exists within the market. The lack of standardisation in wholesale charges, for exam- ple, means that retailers have to create hundreds of tariff com- binations to match the varia- tions across different wholesale regions. To illustrate this, in order to on-board six national customers, we had to create 2,000 different tariff combina- tions. The sheer number of tar- iffs is making the on-boarding process and day-to-day main- tenance of customer accounts very time intensive and costly for retailers – and confusing for customers. Rationalisation of wholesale tariffs, and more standardisation around whole- saler policies in general, would simplify market processes and significantly improve the experi- ence for customers. Data quality was a significant issue in Scotland when the mar- ket first opened, and it won't be a surprise to anyone that there are similar challenges in the new market. What we have been sur- prised at is the scale of the issues that need to be addressed. Our early experience of ten- dering for new business is that the data we extract from the market is oen either incomplete or inaccurate, which is introduc- ing risk to the bidding process; increasing costs for retailers; and making it difficult for customers to make a true like-for-like com- parison of retailers' price and service options. While there is no quick fix, provided retailers and wholesal- ers work together to address data accuracy, then we should start to make real progress in this area. The downside is that without any proactive steps to improve the quality and completeness of the market data, these issues will oen only be exposed as customers switch, which doesn't leave customers reflecting posi- tively on their initial interactions with the new market. Finally, the market is there to benefit all customers, but there is already evidence that some small and medium-sized enter- prises are having difficulty find- ing any retailers willing to switch them. The data quality issues and the complexity referenced above eat into the very small margins available to service custom- ers. Added to this, the ongoing cost to serve customers is high relative to the margins available, with the meter reading costs in part icular disproportion ately high (for everyone except the incumbent retailer in the area) relative to the margins available. There is no doubt that if our experiences are representative of other retailers, then this will be perpetuating the lack of switch- ing within the SME sector. Unless these issues are addressed, it will be very difficult for retailers to be able to offer the types of price discounts and value-added services small and medium-sized businesses are expecting. PR19 provides an ideal opportunity to reflect on the experiences to date and to address the limitations of the low margins, in the context of their impact on customers and in light of the materialising costs for retailers associated with the new market. The fact that there are bed- ding in issues with the new mar- ket is inevitable; no-one would have expected the market to operate seamlessly from the out- set. While each issue will take time to resolve, it is important that all market participants work together to identify and imple- ment practical and reasonable measures that can help resolve the issues outlined above and deliver a market that truly works for customers.

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