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Water market reforms will increase competition in 2017.
The water industries in England and Wales underwent privatisation in 1989 and have since operated regional monopolies in both countries. As a result, barring a small number of exceptions, consumers are unable to choose their supplier. Ultimately this means that the market lacks competition.
Market reforms were discussed for many years with the idea to make the industry more open and competitive. Scotland took the initiative with this and introduced their reforms in 2008. England followed with the Water Act 2014. Wales originally planned to pursue increased competition but chose not to in May 2015.
The first big change in the water industry in England will occur in April 2017. This is when the retail water market will be opened, allowing non-household consumers to decide which supplier they want to work with and switch if they choose to. Subsequently this will lead to much higher competition and give people the opportunity to search for the right service. They will even be able to choose suppliers in Scotland thanks to a cross border agreement.
The reforms also remove barriers for new entrants and incumbent companies. It will allow providers to enter the market more easily, potentially leading to even more competition. Existing suppliers will be able to step out of the non-household retail market if they wish.
When water reforms were debated the intention was not to extend them to domestic/household customers. As a result they will not be affected by the changes in April 2017 and won’t be able to switch their supplier. In November 2015 though the idea was discussed and a further assessment of extending the open market was requested. This will examine the costs and benefits and see whether the extension can and should occur.
The reforms will have an impact on the upstream of the supply chain though, but not before 2019. They will open up the market for new entrants, allowing them to supply raw and treated water, take on waste water removal, and provide sewage treatment services. The new entrants will be able to cater for the domestic/household market without having to provide retail solutions. As a result this could see a big increase in competition.
As you can see the retail non-domestic water market is poised for big changes. At H2O Building Services we are on hand to help clients understand the changes and the opportunities that higher competition can offer.