All businesses in England can now choose to switch water retailer – opening up the opportunity to reduce water bills, improve service and simplify administration.
Following April's water deregulation, organisations have the option to shop around for retail water and wastewater services in the same way as purchasing energy. There's no change, however, to wholesale water services (the infrastructure that brings water to your site and removes waste water and drainage), which remain under the control of your existing retailer.
But what steps should businesses take to switch water retailer and what are the potential pitfalls?
1. Be Prepared
Unless your contract is very simple, i.e. a single site and meter point, you will need to start specifying your arrangements to prepare to go out to the market and seek quotes.
Understand your current contract and usage by auditing your water consumption and existing charges. Collate accurate details of your sites, meters and volumes, then organise and cleanse this existing data. Look out for Supply Point ID’s on you recent invoices – these are the reference numbers which the market will use to identify your supplies (just like an MPAN in the electricity market).
To start the process you will need to supply information of what water you are using and where, along with a letter of authority and at least one, but ideally 12 months' copies of bills.
2. Cleanse your accounts
While collating data, ensure that missing information and underpayments or overpayments are rectified. This is necessary to ensure that any outstanding issues are resolved and a smooth transfer can take place to a new retailer. By validating your bills you could identify opportunities to claim for historic overcharges and be eligible for a windfall rebate. This could also lead to lower ongoing costs.
3. Look beyond the tariff
Although direct tariff cost savings may be modest until Ofwat's 'PR19' price review takes effect from 2020, significant cost savings may be gained via improved service levels, for example consolidating billing, which has big advantages for multi-site businesses.
Although only England and Scotland currently have a deregulated business water market, some suppliers will be able to offer consolidated billing for multi-site customers across the UK, including Wales and Northern Ireland.
4. Don't delay
With potential cost savings on offer and the prospect of simplifying administration, plus other value added opportunities, it is sensible to explore switching water contract sooner rather than later. It can take time to prepare to go out to market by collating and cleansing data, identifying qualified brokers, etc.
There is little point in hanging back in the hope that better deals will come forward. Potential retail margins (and therefore tariff discounts) are likely to be stable until Ofwat's price review in 2019.
5. Be Careful
Be wary of inexperienced and rogue brokers, who have no track record in the water industry and are moving into the market. Avoid being seduced by promised savings, and carry out due diligence on suppliers to prevent the risk of locking into a poor deal.
There's not the same price volatility in the water market as there is for energy, so procurement should be simpler and based around fixed price contracts. As with any contract, it’s the small print that is often crucial. Even if you undertake your own tendering process, an independent review of the contract before signature is recommended.
Many retail contracts are being quoted based on discounts against the default retail tariffs with the incumbent retailer, but some suppliers are offering 'wholesale plus' deals. Be wary of the latter as they may not tell you how much you are saving against the retail default and you could find yourself worse off.
6. Don't overlook water efficiency
Poor water efficiency is costing British business more than £3.5bn a year, so leak detection coupled with water efficiency measures can pay rich dividends. Retailers are showing greater enthusiasm to offer these services to gain a competitive advantage in a market with relatively little price competition.
Water saving measures might include using automatic meter reading (AMR) technology to monitor consumption; installing flow or pressure controls to regulate water flow; or harvesting rainwater for reuse, many of which require little or no investment and provide rapid payback.
Some added value services, such as AMR, may be negotiated as part of a new retail supply contract.
☛ Bob Millar is water specialist at Inprova Energy