The retail water market is due to open to all non-domestic users from 1st April 2017. We have been active in advising our clients of this change, however I thought Id cover the flip side just in case any Made In The Midlands members are considering signing with a broker who is pushing discounted water terms.
Background
The market opened for competition in Scotland back in 2008 and this is being used as the model for England (not Wales they voted against it). Initially the discounts were small but eventually increased and we suspect that may be reflected south of border.
Why Is This?
The regulator in Scotland carried out an audit of the water companies and analysed where the greatest margin (or profit) was possible. When the market opened the retailers offered modest discounts which the regulator did not challenge. The reason being the regulator knew the system was not robust enough to cope with a large number of businesses changing supplier or negotiating discounts all at once.
What Happened Next?
After the systems had proved themselves, the regulator using the results of the audit, insisted the water retailers pass on improved discounts to the end user. This increased savings from around 5% to 20 -25%. This was not back dated, it was only available to new customers.
Will This Happen In England?
Possibly We suspect discounts will increase over time but it is unlikely they will reach the figures in Scotland. Estimates reckon is will be nearer 12-15%.
So Is It worth Waiting?
If the pattern in Scotland is repeated in England, then the answer is yes. Ive attended a couple of presentations hosted by water retailers and they claim there is very little money in retail so any reduction will be minimal. They would say that, wouldnt they? The honest answer is we dont know, but from empirical evidence we reckon a delay might be beneficial.
But My Broker Is Urging Me To Sign Now
They might well be and that could be for reasons of self-interest. After all, a broker will get paid once that contract is signed regardless of a clients frustration that the long term deal the broker foisted upon them is both woefully uncompetitive and legally binding.
All Brokers Are Independent Right?
That depends on the meaning of independent. Just because a broker says they ae independent really doesnt mean that they are. It is the same for energy arrangements where more often than not an independent broker might have very cosy relationships with 1 or 2 suppliers and as such they limit their clients ability to access the whole market.
There Must Be Some Advantages Of Committing Early?
There are but they are not necessarily financial. Consolidated billing is a big plus for any multi-locational operation. At present they could receive bills from up to 22 different companies in England so having a single account each month makes life a lot easier.
What To Do Next
If you are an existing client your analyst will already be working on this for you or had initial conversations about your options. If you are a MiTM member who we have yet to meet and talk through our services as a MiTM patron please get in touch for a chat.
Contact Details
Liam Conway
[email protected]
07501221728