Riding the waves of change

Guy Ledger | 25 Apr 2016 | Comments

Since privatisation the water industry has made modest progress towards competition and choice for customers. But, big waves of change lie ahead that promise to transform the industry and provide exciting new opportunities for companies and investors with vision, and an appetite to influence and exploit the change.

Very soon businesses in England and Wales will have a choice of supplier in the same way businesses currently do in Scotland. For the first time, companies operating across the UK will have the option to switch suppliers and consolidate their water and wastewater services, creating opportunities to generate savings through competition, efficiencies and economies of scale; an option available with other utility providers for many years.

Under the first wave of change, by April 2017 water and wastewater retailers will be able to play for some 25,000 business customers. In response, and through a forced separation of their retail and wholesale operations, existing water companies are gearing up to face the new non-household competitive market. The new joint venture between United Utilities and Severn Trent Water to exploit the changing market, and Portsmouth Water’s decision to exit from the non-household retail market, both show how the existing water companies are starting to transform. Without doubt, this is just the beginning as the new rules open up the way for incumbents to adapt, and for new companies to enter the retail sector.

On the water supply side, discussion is taking place about the possibility of deregulating water resources in response to growing scarcity of this precious commodity caused by climate change and population growth. Akin to this, is whether customer bills should be differentiated on the basis of “cost to serve”. Politically, this looks like a step to too far, but in an increasingly competitive world it's easy to see how some customers may not want to subsidise the price paid by others.

The waves of change – real and potential – are evident and will have far-reaching impacts for operators, investors and consumers alike. To respond to these challenges everybody involved within the sector – water companies, their supply chain partners, investors and government - need to be ready to shape and grasp these opportunities, and turn foreseeable change to their advantage.

You can read the full article on how Guy Ledger thinks competition will impact the water industry on water briefing.