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How to untap water savings in a deregulated market

Posted by Inprova Energy on 3 October, 2017

In an article written for Energy Manager magazine, Inprova Energy's Bob Millar discusses how businesses can tap into the benefits of water market deregulation in England.

Until April 2017, businesses in England had to purchase all their water services from a regional monopoly and costs steadily rose. In contrast to the open gas or electricity markets, there was no customer choice, except for very large water consumers. However, this changed recently when England followed Scotland in deregulating its non-domestic retail water market.

Now, organisations of all sizes can shop around for their retail services – opening up the opportunity to reduce costs and improve service levels. 

How deregulation works

Under deregulation, existing regional water companies remain responsible for wholesale services, i.e. the infrastructure that brings water to your site and removes waste water and drainage.  However, they must now compete against other suppliers for your retail water and wastewater business (including billing and other customer-facing services). 

If you have sites across England, and/or Scotland, where the retail water market has been deregulated since 2008, you can consolidate arrangements under one retailer, which could mean just one monthly bill.

There are no changes yet in place for Wales or Northern Ireland, but some suppliers will be able to offer consolidated billing for multi-site customers across the UK, which would simplify and reduce the costs of administration.

Customers with larger water requirements may be able to ‘self-supply’ by applying for a retail water licence from Ofwat and deal directly with their wholesalers.

What are the benefits of switching?

Direct tariff savings are proving to be modest, but this is expected to improve after 2020 when the 2019 Ofwat price review will be implemented. For the time being, the biggest benefit is likely to be improved service levels and water efficiency services, which can deliver considerable time and cost savings.

If you have the administrative headache of managing water arrangements at different sites and are responsible for juggling many water bills from different suppliers, then consolidation can simplify this process. 

Whether or not you decide to go ahead with switching water retailer, it can be beneficial to cleanse your existing data. This can help you gather missing information and ensure underpayments or overpayments are rectified.

Reputable water consultants will undertake a historical billing audit on your behalf to identify potential historic overcharges.  Billing errors are not uncommon, so you might receive a windfall rebate or lower ongoing costs. This preparatory work will also help reduce costs when it comes to tendering for retail services.

As part of the data checking and gathering phase, you will need to collate accurate details of your sites, meters and volumes for a ‘hassle-free’ tendering process.  Look out for Supply Point ID’s (SPIDs) on your recent invoices – these are the reference numbers that the market will use to identify your supplies (just like an MPAN in the electricity market).

If you are using an experienced water consultant, they will conduct the data management for you.  To start the process you will need to supply information of what water you are using and where, along with a letter of authority and at least one, but ideally 12 months' copies of bills.

Generating water efficiency savings

Leak detection coupled with water efficiency measures can pay rich dividends in terms of cost reduction. Using water more sparingly can help you comply with current and future legislation, to improve environmental performance and generate positive PR.

It's important to compare your water consumption and benchmark against other sites, which will improve your understanding of your water consumption profile and what scope there might be to increase efficiency.

There are a number of steps you can take to save water, including using automatic meter reading (AMR) technology to monitor consumption; installing flow or pressure controls to regulate water flow; or harvesting rainwater for reuse. Many of these initiatives require little or no investment and can provide a rapid return on investment. Some suppliers will provide assistance as part of a new contract.

Is it better to wait and let the market settle?

With potential cost savings on offer and the prospect of simplifying your administration, plus other value added opportunities, it is sensible to explore the opportunity sooner rather than later so that you can realise the benefits immediately.

Procurement is much simpler in the water market, than for energy. This is because of a lack of price volatility and, therefore, the prevalence of simpler fixed price contracts – typically over three years.  Since market rates are unlikely to change significantly until after the 2019 Ofwat price review, which will take effect in 2020, there's little point in hanging back for better deals to arrive.

As with any contract, it’s the small print that is often crucial.  Even if you undertake your own tendering process, an independent review of the contract before signature is recommended. Improve Energy Tender Process