Ofwat warms to prospects for household retail market competition

Given its previously measured appraisal of the likely costs and benefits of the introduction of competition in household water supply, Ofwat this week came out with an enthusiastic promotion of the gains it might offer.

Its final report on residential retail market prospects differed little in material terms from the draft report published in July. But in its accompanying release, the regulator lead on the possibility that competition could be worth £3bn to English customers over 30 years – £8 a year saving per customer.

CC Water warned that the proposition wasn't going to interest many customers and suggested there were lessons to be learned from the enegy sector's experiences of household retail market opening. CC Water chief executive, Tony Smith, said: “Most households like the idea of choice, but our research shows very few – around 6% – of customers are likely to switch for a saving of up to £10."

He added: “We want to avoid a situation like in energy where a largely inactive market leads to some customers paying more and being disappointed."

Ofwat foresaw benefits beyond price discounts potentially resulting from competition, including: "innovation, improved customer service, new offers – including bundling of products such as energy and telecoms with water." It said new entrants saw opportunities to offer new products and services and to "make customers' lives easier".

Ofwat chief executive Cathryn Ross said: “We are living in an age of retail revolution, but water customers are being left behind. The uncomfortable truth is that, when it comes to retail offers, water companies provide an analogue service in a digital age."