Will Open Water really mean open competition for non-household customers?

Written on 28 Mar 2017

What is Open Water?

On 1 April 2017, the competitive water retail market for business, charities and public sector customers will open. More than 1.2 million eligible customers will, for the first time, be able to choose their water provider. This is expected to generate significant competition between water companies, particularly for high-value, reliable customers. In effect, customers will have the same choice over their water retailer as they currently have for energy and other

Environment Secretary Andrea Leadsom stated that: “It’s great news that over a million businesses – be that a car wash, factory or supermarket – will be able to find the best water deal that works for them from 1 April.” Similarly, Ofwat CEO Cathryn Ross commented that: “… businesses, charity and public sector customers will be able to choose a water retailer that best serves their needs, or simply to negotiate a better deal with their current supplier.”

On the other hand, some commentators have questioned whether, given the limited scope for price competition in the UK water sector due to regulatory price controls, there will be sufficient benefits to customers to incentivise them to switch water suppliers in significant numbers.

Osborne Clarke comment

Given recent M&A activity in the sector as water companies seek to get in a prime position to take advantage of this new growth opportunity, existing water companies and new market entrants will need to be mindful of the legal and regulatory framework as they seek to win new business and/or to defend their existing customer base.

In particular, defensive measures by incumbent water companies may come under scrutiny from a competition law perspective, for example if would-be rivals believe that they are unable to get traction with customers due to an incumbent’s exclusionary tactics.

Ofwat is now expecting the historical geographic boundaries between water suppliers to become erased over time, and so we would expect Ofwat to be quick to intervene if it senses that market behaviour is preventing the benefits envisaged by this reform from flowing down to customers in the coming months and years.