Water efficiency levy should be applied to bills to fund business water savings

Wholesalers should be funded and incentivised to deliver water efficiency savings in the business market in the short term. That’s according to a report by Economic Insight, commissioned by the Retailer Wholesaler Groups’s Water Efficiency Subgroup, funded via MOSL’s Market Improvement Fund.

Economic Insight found customers’ willingness to pay for water efficiency is below the efficient cost to supply these services. “Therefore, there is currently insufficient value in the market to enable delivery. To overcome this lack of demand and value in the market, and deliver water efficiency savings in line with Defra’s proposed national water consumption reduction target (9% reduction by 2037), market participants require funding and incentives amounting to at least £22m per annum.”

The research recommended a wholesaler-led strategy, funded through a transparent water efficiency levy, applied through an increase in water wholesale costs for all non-household customers. The levy should be ring fenced for this purpose, and wholesalers incentivised to deliver via the price control – such as a price control deliverable or a reward and penalty outcome delivery incentive.

Economic Insight noted that the door should be left open for a more retailer-led approach in the long term. This would involved boosting customer understanding of the need for water efficiency, and providing ring-fenced funding for retailers to conduct water efficiency activity on top of wholesaler activity, via the Market Performance Framework.