Shepherd and Wedderburn helps water industry take significant step forward

From April 2017, all business customers and public sector, charitable and not-for-profit organisations in England will be able to choose their water and sewerage supplier. The benefits of that choice are already being felt by non-household customers in Scotland, but success in any utility market depends on how clear and effective the rules of the game are.

So it is now being hailed as a major achievement that Open Water, the organisation that brought industry and regulators together, has delivered an important staging post to opening up retail competition: Through extensive and detailed consultation, and with Shepherd and Wedderburn’s support, it has produced the codes and processes that will be recommended to Ofwat as necessary to set up a resilient, safe and competitive water sector. 

These comprehensive draft documents are available nearly two years before retail competition goes live and so should allow companies to make their business process and systems development preparations in time for thorough testing and shadow operation. All of which will help to guide industry decision makers in their preparations for the market opening in April 2017.

Leading the firm’s regulatory team in drawing up the codes, Partner Liz McRobb, stated:  “Over the past 12 months, Open Water has consulted with more than 40 companies, developed many new proposals and worked with Defra and Ofwat to implement the government's policy objectives, and also with many others to ensure that health and safety and the safety of drinking water should never be compromised. That work is ongoing and we feel privileged to be part of the team that has developed the proposals to the current level of detail. Earlier this month, Open Water uploaded 112 documents, running to 3,400 pages and dealt with some 1,500 items raised via consultation responses. Most importantly however, working with the Open Water team we have been available to companies and spent time in extensive workshops – establishing a broad consensus around what the most effective rules of the game for this market will be.

“We have been privileged to have worked with some excellent professionals such as Alan Sutherland, Chief Executive, Water Industry Commission for Scotland (WICS) and Programme leader of Open Water; Jessie McLeman, of Scottish Water and leader of the codes and processes workstream and Janine White of United Utilities, to name a few. We have also been fortunate to work with a really great team from PA Consulting and with the excellent settlement specialist, David Nicol.

“The whole process has been approached in a truly collaborative spirit by all concerned and, as a result, the outcome is a very positive one. I believe the approach taken in this initiative is one that has potential to be adopted for water governance and economic regulation initiatives in other jurisdictions.”

The retail water market is expected to work in much the same way as it does in other utility services, where a range of suppliers compete for business customers by offering them the best deal whether as to price, service quality or overall value. Being able to switch water and sewerage service supplier will mean that businesses are free to negotiate for the best package; be it through more efficient customer service and better-tailored packages, water efficiency advice, or price.

Jessie McLeman of Scottish Water, who led all of the codes and processes work on the programme said:

“The engagement of the companies in the many workshops held throughout the process has been tremendous and is greatly appreciated; it has stimulated a very good level of discussion, helped to promote transparency, and generated a collegiate approach to finding solutions appropriate to the particular market context.  Since the Water Act 2014 passed into law, we have been sharing  some of our experiences of the approaches and practical measures we have adopted for establishing mechanisms necessary for the establishment  of retail competition in Scotland. This is an important milestone in the process of giving business customers in England and Scotland the opportunity to choose their supplier for water and waste water services."

According to Alan Sutherland, Chief Executive, WICS, “There is much work ahead, but what we have published in May is a very good outcome.  What has been significant in this process is that it has provided real opportunity for stakeholders to be heard and for them to help to shape the way in which the water sector in England is opened up to competition.”