by David Tyler
As the Open Water programme moves through its consultation phase, we’re seeing more and more activity from both incumbents and potential new entrants into the wholesale and retail markets for non-household water and sewerage in England.
In a previous Know How, my colleague Richard Williams explained how market competition will force water companies to invest in systems to manage inter-company dataflows. In particular, these systems will need to support processes such as transferring customers from one supplier to another, or apportioning and distributing monies between retailers and wholesalers.
Today I want to look more closely at the possible pitfalls that individual water companies and the industry as a whole will need to avoid when Open Water comes into force in 2017.
Learning lessons from other markets
Firstly, there is the danger of not heeding the lessons that other industries have learned the hard way.
Scotland’s water industry, which already has an open market, is still dealing with challenges around data quality and data exchange between retailers. Meanwhile, the UK energy sector has taken years to reach a point where industry dataflows are managed adequately. The early stages of implementation experienced a significant number of process and data alignment issues leading in many cases to a failure in the transfer of individual customers from one supplier to another.
In both cases, the cost of technology investments and the impact on customer service have been much greater than anticipated.
Participants in Open Water have a great advantage because these two industries provide clear examples of what works – and what not to do. Instead of being reactive and gradually building up complex systems and processes over time, they can get a head-start by following the best practices that have already been mapped out.
With the right approach, they should be able to plan and architect systems and processes that will be simple, efficient, and work effectively from day one, while also remaining flexible enough to adapt to future demands.
Understanding the market’s unique requirements
While failing to learn from other industries would be fatal, there is also an opposite danger: the danger of failing to recognise the uniqueness of the requirements of the new market.
For example, unlike in Scotland, where there are many retailers but only one wholesaler, retailers in England will need to be able to work with multiple wholesalers – so the contractual relationships and industry dataflows will be more complex.
At the same time, water companies will not need to operate on the same scale as the UK energy market. The new English market will only contain about 1.5 million non-domestic customers – less than a tenth of the customer-base of UK gas and electricity suppliers.
The Scottish model may be too simple, while the energy model may be too complex and unnecessarily expensive – so slavishly following either is unlikely to be a recipe for success. Instead, retailers and wholesalers within the new market will need to find a model that combines the best of both.
Charting a course for Open Water
This is why it’s so important for technology partners to play an active role in the development of the new market. They are uniquely positioned to help water companies plot a course to Open Water, because they have experience of working with industry dataflows in a wide range of markets and scenarios.
With the right approach, the right technology and the right partners, water companies should be able to work with the government to build a market that allows them to compete fairly and deliver better value to stakeholders and customers. And companies that start their planning today could gain a significant first-mover advantage by designing systems and processes that will give them a competitive edge when the market opens for business in 2017.
For more information about our work with water clients, click here.