Ofwat chooses not to set targets on business retail success

Ofwat has opted not to set any specific targets for the new non-household retail market in its consultation released yesterday on its monitoring plans for beyond April.

The regulator described in general terms what a well-functioning market looks like, and reiterated the Open Water programme’s success criteria. But rather than translating these characteristics into defined targets, it said it would adopt a flexible approach to evaluating how the market is functioning and developing, and one that would evolve over time.

Ofwat plans to monitor “a number of key metrics based on well-established best practice of regulators in other industries”. These fall loosely into three categories:

  • Market structure – for instance, the number of retailers and third party intermediaries in the market.

  • Market conduct – including around the behaviour of market participants and the treatment of customers.

  • Market performance – specifically levels of customer engagement and the nature of customer outcomes.

The regulator plans to use a combination of proactive and reactive approaches to revealing this information. The mainstay, to be reviewed monthly, will be data from MOSL; material that is “already available in the Central Market Operating System in a consistent format which can be interrogated using the system’s reporting tools, without us requesting that information from individual companies – such as the allocation of supply points between retailers, which will help us determine market share”. This will be supplemented by annual interrogation of data collected from retailers – for example on whether they offer multi-utility billing and the amount of debt in customers accounts.

These two key sources will be supported by an annual survey of eligible customers and some form of monitoring of TPIs.

Ofwat will also monitor incoming data such as customer complaints, as well as informal sources of information including social media and traditional media reports. It is mulling developing the Open Water website to facilitate this – to collect/display media items about the market; to provide a portal for customers to log concerns; and to provide a means of Ofwat communicating with the market.

The regulator is also consulting on: segmenting its monitoring – by customer type, geographical area and so on; the extent to which monitoring should be transparent; and its approach to intervention. The consultation runs until 10 February.extent to which monitoring should be transparent; and its approach to intervention. The consultation runs until 10 February.