Competition in the Water Industry

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2017 Water, Environment & Transport Conference
24 February 2017

Over the last thirty years, the regulated market in water supply has enabled steady investment, predictable price increases enabling water customers to budget, steady improvements in water quality and low levels of customer complaint and dissatisfaction. Now, though, Ministers have expressed a wish to introduce competition for households, following the introduction of competition for commercial users in April 2017. OFWAT has published an analytical paper showing that in only two of four scenarios, would the average customer see any price benefit, and that this benefit would be very small. The introduction of competition for large users is already leading to chaotic reorganisation within the industry as companies separate themselves into retailing and operational arms, as required by the regulator.

Terms and conditions are already coming under attack as a result, as the new entities that are being created for large-user competition seek to deny union recognition, employ new starters on worse terms than existing employees and deny access to company pension schemes. These trends would be accentuated by the greater market and customer volatility that household competition would entail, as new entrant retailers, whose “innovation” consists of paying employees less and paring pension provision to the minimum, would arise.

We fear that Ministers intend that water should follow the same failed model of the electricity and gas markets, where competition has led to:

a. Recurrent mis-selling scandals in energy markets, resulting in fines and penalties of over £200m paid by energy firms since 2010

b. 5 million complaints by customers to energy firms in 2015, and over 6 million in 2014

c. An increase of customers on pre-payment meters since 1992 of more than 100% for electricity, and more than 300% for gas. These mean that poorer customers “self-disconnect” and prevent reliable figures for households without energy

d. So many households in fuel poverty that the Coalition Government changed the definition of fuel poverty rather than dealing with the poverty itself

Conference calls upon the WET Service Group Executive to:

1)Meet with OFWAT and the Consumer Council for Water, to press the arguments for understanding the impact of competition for commercial users fully before any consideration is given to the case for extending this to the household sector;

2)Through Labour Link, work with shadow ministers to make the political case for maintaining the existing market arrangements for households;

3)Use all available campaigning methods to promote the effectiveness of existing arrangements and raise awareness of the risks to service quality represented by household competition, to Government, in Parliament, and through the media;

4)Work with branches to protect the terms and conditions of our members and meet the challenges created by increased competition.