water metering
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Water retail risks becoming a two-tier market as innovation favours larger customers, according to new report.

The water sector in England and Wales has, since April 2017, allowed all eligible non-household customers to choose their provider of water and wastewater retail services.

In a new report, Innovation in the Water Retail Market: One Year On, Cornwall Insights reviews the new product and service offerings now available to this market segment.

The report highlights that while innovation is starting to occur particularly for the benefit of larger customers, barriers still exist.

They include low margins, which makes it harder for retailers to differentiate themselves. Additionally, “poor data is still leading to inaccurate billing and frustrating efforts to provide new and better services to customers.”

It has further been noted that there is some role confusion around responsibility for certain issues.

Importantly, there is a risk of a two-stream market developing, with smaller customers seeing fewer benefits.

Key areas of opportunity are customer service, water efficiency and automatic meter reading (AMR).

“Progress is being made across all areas of the market; however, it appears that quick gains have been hard to secure,” says Steven Britton, senior analyst at Cornwall Insight.

“… over the past year the industry has been adjusting as retailers, wholesalers and customers get to grips with the new market. This has meant their attention has been more focused on getting the basics right rather than developing new service offerings.

“Despite improvements, several barriers to innovation in the market still remain… Until these barriers are overcome, the market will continue to find it difficult to reach its full potential. The most significant area for opportunity right now is customer service, as this is where the market has furthest to go.

“As things stand just now, there is a real risk of a two-tiered market developing as the savings opportunities are currently greater for larger organisations. From early on there were many reports and warnings to Ofwat that the market was working for large consumers, but SMEs were being left behind. While it is understandable that retailers will focus on those customers where water efficiency savings and margins are highest, the idea that it is harder to offer more bespoke services to SMEs will become a self-fulfilling prophecy if the market metrics and processes don’t change.

“The first year of the new competitive water market has showcased some of the innovations that are now possible. However, there is still a long way to go before all the benefits of the new arrangements are realised.”