27 July 2000 | Liam O'Brien
Savings of at least 20 per cent on water costs are being promised to large business users by a new national water supplier. The launch of h2go is expected to herald the opening up of the business-user water market.
Set up by Anglian Water, h2go is looking to supply the 5,000 or so companies in the UK that have bills of £100,000 or more a year for water, waste-water and recycling services. The company claims it can slice at least a fifth off what the local utility charges by partnering with the customer for greater efficiencies.
Under the existing framework, a non-local water company can sell only water from river abstractions and bore holes, or water it has already bought from the local provider, to local users.
Chaired by Clare Spottiswoode, former director-general of gas regulator Ofgas, h2go predicts that it will have a turnover of £30 million within the next three years.
The company also expects to be able to supply smaller firms, as the government is preparing to relax the laws governing supply and allow out-of-area competition for customers that have water bills of around £50,000 a year. It also thinks that it will be possible to supply small to medium-sized users with bills of £10,000-£12,000 a year within three years.
Andrew Jessop, h2go's managing director, said: "In the longer term, the water industry is going to follow the pattern of all the other utilities, with smaller and smaller companies benefiting. The Department of the Environment, Transport and the Regions has made it clear that businesses should have a choice."
Chris Lewis, an energy-buying consultant and former chairman of the CIPS energy committee, said the move signalled a sea change for the industry. "This is the first big step for an established water company to sell out of area via a subsidiary firm.
"It signals that Anglian is really serious about reaching customers in other areas. Other water companies will be really concerned about this - especially as Clare Spottiswoode and Andrew Jessop are both formidable operators."
The Major Energy Users' Council said that after higher-than-inflation rises in water bills over the past 10 years - sanctioned to rectify chronic underinvestment - major users were now due better terms.
"Business users have been overpaying for water," said Aubrey Bourne, policy adviser to the council. "Until fairly recently, there were no large-user tariffs, which meant that water companies could charge large users the same as domestic users for drinking water."
CIPS welcomed the launch, but said it would be concerned if discounts for large users were to be paid for by smaller users. Carl Kockelbergh, technical services officer, said: "If larger customers are cherry picked, the local water company still has to make a profit."