Competition regime not working, says consumer watchdog

Posted: Friday 6th July 2007

A survey by the Consumer Council for Water and Ofwat detailing business customers’ views of competition in the water industry has revealed that the water competition regime is not providing businesses with a workable framework in which they can change their water supplier.

Despite interest from business customers, more than 18 months after the launch of competition, none has actually switched their water supplier - and the results of the survey indicate this is likely to remain the case, at least in the short term.

Responding to the business community’s frustrations with the competition regime, the aim of the survey was to help the Consumer Council for Water to gain a greater understanding of business customer views and expectations regarding competition. The research will also be taken in to account by Ofwat in its ongoing review of competition. The next step will be a wider consultation this month.

The findings reveal a clear indication that the existing competition regime is failing to meet the needs of the businesses it was designed to serve, with most dissatisfaction and interest in competition revolving around the question of price.

The introduction of competition into the water industry in December 2005 gave more options to large business users (around 2,200 businesses likely to buy more than 50 megalitres of water per year) to change supplier in order to reduce cost and negotiate tailored service levels.

Most business customers (84%) are supportive of competition in principle, but only 30% are confident that the current regime will deliver benefits to customers. Nearly two thirds of customers were likely to switch in the right circumstances, but about the same number think the competition regime for the water industry compares unfavourably with other utilities.

The most important factor in a decision to change water supplier appears to be the ability of the business customer to achieve a lower price for their water supply, with 81% indicating this would need to be a saving of up to 10% with a subset of those (39%) saying up to 5%.

The survey revealed that only 28% were satisfied or very satisfied with the level of their current bill, so it is no surprise that 93% would switch if offered lower bills. Around half (49%) would switch if a better service was offered by a new supplier, while 43% wanted a guaranteed switchback.

Businesses saw ‘barriers’ in the competition market as relating to uncertainty about the way the market works and the inability of new entrants to secure a low cost wholesale price.

The survey also found that those companies with multiple sites appeared to be more engaged or aware of the issue of competition – understandable given the potential they have to make savings. The report concluded that consideration should therefore be given to expanding competition eligibility to include multiple sites that meet the minimum threshold criteria.

Sir James Perowne, Deputy Chair of the Consumer Council for Water, said: “Dealing with the issues raised in this research will be a matter for government, sector regulators, and the Consumer Council for Water, working with the water industry.

“There are a number of barriers which are stopping the new regime from working. These need fixing. The market also needs to be bigger with more customers having a choice.

“We need to be clear where the water industry is going in terms of competition and over what time scale. If some customers will not be allowed a choice, it is important that they are not disadvantaged by the extension of the regime.”

Read the magazine online

July 2021

About the magazine »
Magazine archive »


Information for advertisers »

British Water Huber Pulsar Button June 13 Water Aid Harvey Communications Cranfield University buttonwood marketing wateractive
Pulsar New Banner