Great news for the English Water Retail Market, but first the bad news.
Discounts in the English Water Retail Market may not be enough to encourage companies to switch water supplier, but you knew that already right?
Northumbrian Water Group Business Managing Director Lucy Darch said in Utility Week recently “Margins in the English market are tight. This does beg the question of what level of discount will be available in England” she added “I’m imagining somewhere between 0% and 5% of potential discounts that a customer could get in England”
Darch goes on to say “This differs from Scotland where customers get much bigger discounts with some achieving up to 30%”
The driver for switching water supplier may well be that perceived simplicity of receiving just one bill for those customers with multiple sites, likewise in those areas of the UK where there is a separate supplier for water and one for waste water then the driver for switching water supplier may well be billing consolidation.
So forgetting the much talked about added value services, switching water supplier appears to be a none starter, at least until the next price review in 2020.
Now that’s the bad news, the really great news is that for some commercial water customers there is a huge opportunity, especially for companies that have large sites and are large water users, or companies that have multiple sites and high water bills cumulatively.
There are two categories –
Starting with large manufacturing and production, hotels, hospitals, universities classed as large single site large users – the options are an alternative water supply.
A brand new national water supply company will complete an initial feasibility study for an on site private water supply (borehole) taking the site “off grid”.
The Alternative Water Company Ltd will complete a detailed survey and if there is an underground source of water the company will submit an offer to supply water at a cost far less than the customers existing water company is providing. Reported discounts ranging from 25% up to 35% The Alternative Water Company Ltd will design, construct and supply water at no capital cost to the customer, providing high quality water to meet the customers exacting standards.
With these impressive discounts its little wonder The Alternative Water Company Ltd already have customers with a total spend of nearly £2million, all of which have met The Alternative Water Company criteria and moving forward with projects in Yorkshire, Durham, Plymouth, Devon, Northumberland and Scotland.
The company provides a national water supply service and has ambitions to attain a turnover of £50million within 7 years, the company also has ambitions to supply the residential water supply market.
If it is not possible to install an alternative water supply the large water users should go down the “self supply” route.
This is not publicised or indeed discussed very often for many reasons, primarily as becoming a self supply licensees in simple terms means cutting out the water retailer and accessing the wholesale market, basically you the customer pay wholesale charges and cut out the retail margin.
This works in both the Scottish water market and the English water market and is rarely in the media as the water companies and other water consultants take the simple most profitable routes.
The water audit experts at H20 Building Services are running financial feasibility models across the portfolio of their existing and new clients in the English water market and the results are estimated to be very positive with customer savings well in excess of the small percentage discounts stated in the media.
What is self supply?
Eligible business customers can choose to self supply their own sites. This is where a customer buys water supplies and waste water services from the water company and provides their own retail services cutting out the middle man.
How does self supply work?
Firstly, it is advisable to appoint an independent water audit expert, one that is fully conversant with self supply management and billing as billing software will be needed to facilitate future water and waste water billing.
Once appointed run a financial feasibility model, this should include provision of the wholesale charges, application of all relevant fees / costs payable on application and annual fees. Then carry out a direct comparison between self supply costs to retail costs, you will find the savings are impressive and will certainly increase as the English Water Retail Market matures and the price review kicks in around 2020.
You should seek to commission your appointed water audit expert to: –
- Run a financial feasibility report prior to application to ensure self supply is right for your business.
- If it is right for your business, assist in the licence application guiding and managing you through the process.
- Provide the billing software and services to ensure you are able to hold and operate a self supply licence and to enable integration with the central market and ensure a smooth transition to wholesale.
- Also to provide the expertise to manage the estate on an on-going basis and to provide expert advice in all areas.
As a self supplier in the market you will receive your water and waste water supply from the water company in your geographical area, you will not receive any retail water services.
Self suppliers provide retail services to their own sites and are able to: –
- Access water and waste water services art wholesale prices.
- Supply water services to multiple sites for your business.
- You will also have a say and help the water industry innovate for the future.
The benefits of self supply: –
- You will buy water and waste water services at wholesale prices, a protected price that all water retailers pay.
- To ensure a level playing field the wholesale procurement contract is on the same terms as any other water retailer.
- Which means that a self supply licensee will pay the price that retailers pay to the water supplier.
- Not pay the retail margin charged by the water retailer resulting in larger water savings.
- Self supply will represent a significant annual saving on your water bills by cutting out the retail margin.
- Service levels will be increased substantially.
- Reduced charges will impact your bottom line.
“Wholesale and off grid is the way forward”