Water competition in U.K. not working


Keith Mason,
Ofwat’s Director of
Regulatory Finance
and Competition
The existing competition regime in the water sector in the U.K. is failing to meet the needs of those it was designed to serve, a survey of businesses has found.

Since its introduction there have been no changes of supplier, and the results gathered in the survey suggest that this will remain the case, at least in the short-term. Indeed engagement with the regime and competition in general is not high, with no evidence to suggest that businesses are dissatisfied with the actual reliability or quality of service in the provision of water from their water company – most expressions of dissatisfaction, or interest in competition, revolve around the question of price – but there are, however, indications that some businesses will switch supplier if the circumstances are right for them.

Since December 2005 non-household customers have been able to benefit from competition, with eligibility based on water consumption of more than 50 Ml per year as well as rules regarding the layout and use of premises.

Two-thirds of respondents are aware that a competitive regime exists, but only 33 percent of the eligible customers are “definite” that they are eligible to switch supplier, and 77 percent consider the service they receive is unchanged since the competition regime was introduced. However, more than 80 percent are supportive of competition in principle, and 60% think the competition regime for the water industry compares unfavourably with other utilities.

The vast majority, 93 percent, would switch if offered lower bills, while just below half would switch if better service was offered by a new supplier. Moreover 64 percent want to see a re-structuring of the industry to facilitate more competitive pricing, and just over half believe the incumbent suppliers need incentives to offer competitive prices.

In response to the findings Ofwat’s director of regulatory finance and competition, Keith Mason, said: “We recognize the concerns of business customers and will be launching later this month a wider consultation setting out a range of options for introducing effective competition into the water and sewerage sectors.”