Two and a half months into what looks like a promising start to the new competitive retail water market, Water Plus Chief Executive Officer Sue Amies-King reflects on progress to date.

Established in 2016 as a joint venture between United Utilities and Severn Trent, Water Plus has about 30% market share in England, a customer base of circa 400,000 customers and a turnover of £940m. The new company, which celebrated its 1st birthday earlier this month, competes nationally serving all customer segments from large corporates in both the private and public sector through to small and medium sized businesses, and sole traders.

All Water Plus core activities are based at its Stoke-on-Trent HQ in Staffordshire, with a satellite sales office in Scotland based near Glasgow. Over the last four months the firm has implemented a scalable cloud-based IT system and migrated all the customers from United Utilities and Severn Trent onto the platform – a huge undertaking, Amies-King says.

The 400-strong workforce are largely based at the Stoke site. “They’re a mixture of experienced people who’ve transferred from the parent companies bringing their water expertise and existing relationships, and new people from the local area with wider retail experience from other markets.”

Water Plus brand is all about personal

Amies-King says Water Plus has “developed a new brand which is all about delivering that personal service to customers“ which recognises that they’re individuals, not just businesses .

So how has the new market unfolded for Water Plus? “We’re pleased with the level of customer engagement in the first few months, the market is very active in the large multi-sites, large commercial organisations." The Water Plus offering has been “well-received in the market” – winning large groups like Sainsbury’s, Kwik Fit and David Lloyd leisure.

The firm has also won positions on some of the biggest local authority frameworks, including the recent Crown Commercial Services framework where Water Plus has won a place on all 3 Lots of the framework.

Offering transcends every sector

So does the Water Plus strategy include targeting specific industry or business sectors?

"We already supply all customer segments so we have developed tailored offerings for businesses of all sizes,” Amies-King says.

Large commercial customers with multiple sites often want a single supplier although some of the very big multis are looking to split it in two just to have some benchmarking in the early days.

They also want useful data so they can see overall consumption for their portfolios and site-specific consumption to benchmark different sites and target water efficiency savings. Water Plus offers a range of additional water management services to reduce water consumption , such as the installation of AMR meters, water audits and leak detection

Multi-site customers want benchmarking data to compare individual site performance

So what type of metrics are customers looking to Water Plus to provide?

“Most of our large multi-site customers look for a benchmarking report which show individual site usage - which ones which need to be looked at further to see why they’re using more water than the site next to them.”

Customers with large, varied portfolios want to compare and contrast and see how they can reduce costs overall. Large manufacturing sites with a large private water network are interested, leakage identification and any optimisation options around self-treatment of water. “So it’s how can you reduce those?” she says.

Turning to SME customers, Amies-King comments:

“I think the thing that’s really interesting is that awareness is still building in the SME market, which is fairly understandable. Large multi-site organisations and the public sector have known about the opening up of the market for quite a long time, so they’ve engaged and come to the market very quickly”.

In Amies-King’s view, SME and small traders and sole traders are still learning about what it means and still getting to grips with whether they consider it to be worthwhile switching, something she thinks “will build over time.”

Brokers are a part of the water market - people need to acknowledge and accept that

Water Plus is proactively going out into the new market to win new business using a range of direct channels and brokers. So how is Water Plus finding its relationships with Third Party Intermediaries (TPIs) and brokers?

Sue Amies-King says Water Plus has a “good strong relationship” with them.

“Brokers will play a key part in the water market just like the energy which is about 70% intermediated. Water Plus has put a broker relationship team in place to proactively manage broker relationships and they’ve created a broker portal to make it easy for them to deal with the retailer.”

“We’ve set ourselves up so we can provide a good service to brokers – including running a number of webinars for 70 to 80 brokers at a time to help them understand the water market so we’re quite active in that space.” she adds.

Currently don’t see big demand for multi-utility provision in large corporate customers - but it’s early days

Talking about the possibility of a multi-utility offering, Amies-King says it’s early days:

“If you look at the multi-site customer sector most haven’t moved down the dual fuel route yet , preferring to keep gas and electricity separate.”

However, from a broker perspective there is interest in combining water and gas because most of them are coming from energy into the water market. It’s possible that brokers could drive more interest in mult-utility deals but it’s too early to say if this will appeal to smaller businesses.

“So brokers are offering to deal with the water procurement for their energy as a value add service to help them retain the energy account.“

Quite a lot of work to do on cleaning customers’ own data

The Water Plus CEO is pragmatic about the potential for data issues in the sector.

“I’m a realist – I’ve worked in gas and electricity and I don’t expect things to be perfect from Day 1. You just work through it with the customer and the wholesaler,“ she says. There are some data gaps but switching will help clean the data and the market processes are there to ensure that wholesalers and retailers respond to data queries promptly “so we’ll be monitoring this closely”.

“The first thing we’ve encountered, is that the customers themselves don’t know what their portfolios consist of so we’ve been working with customers to get a comprehensive site list and then match that to the MOSL market data.”

Water Plus has set up a system to match the sites to the Water Supply Point IDs (SPIDs), including sending off any queries to the wholesalers, before the retailer even proceeds to pricing and bidding contracts. Accurate pricing is key in a market where margins are low, according to Amies-King. “A number of people in the team have come from the energy sector so we understand the risks .“

“Market participants are trying their very best to make the market work seamlessly for customers and we need to continue to work together as well as we did for shadow market set-up to maintain the trust and good will of business customers.”

Simplification needed on pricing- currently “ the complexity is unbelievable”

She is however keen to see some improvements in the process, particularly on pricing, commenting:

“When you look at how we have to price a national contract that spans every region of the country, the complexity is unbelievable. We’ve built some very powerful and advanced pricing models but the number of different areas you have to build into that is beyond any level of complexity I’ve seen in gas and electricity.”

Amies-King’s comments confirm what is already a topic of discussion in the sector – the existence of around 10,000 different tariffs which are currently in place and a range of different charging methodologies by wholesalers.

The Water Plus CEO would like to see two key improvements, namely:

Firstly, more simplified and more standardised wholesale charging over the next five years

Secondly, the introduction of a single portal making it much easier to allow all retailers using the bilateral process to access all the wholesalers’ different service desks and different methods of communication.

According to Amies-King, it would be much easier if there was one portal and all transactions that were bilateral going through it for all the operational services. “That way there would be a way of monitoring all the wholesalers and I’d like to see a league table of performance.” she says.

On the upcoming 2019 Price Review, Amies-King believes that Ofwat will be seeking retailer input amongst other stakeholders. Commenting on the current 2.5% margin, she simply says:

“We have to operate within the margin available and I imagine Ofwat will want to see how customers are benefitting from competition over the next few years as it’s not just about price, it’s about choice, better service and better value .”

More consolidations on the cards further down the line?

Amies-King has some interesting thoughts about how the market will develop further down the line.

“I expect there to be further consolidation as retailers look to scale up – due to the margins available.”

“And I see more new entrants, because it’s a new market and you’ve got that opportunistic element of it.”

However, she questions whethe  all market participants understand the cash flow model well enough. Operational excellence is key:

 “You’ve really got to be good at billing, collection and service – to make sure the model works. It’s really important to be operationally efficient when 94% of revenue is paid back to the wholesaler.”

Cyber security should be high on the agenda for any organisation handling customer data

Moving on to the broader use of data, Amies-King says for any retailer data is key. “Water Plus set up a data analytics function right from the start to help us understand customer preferences and behaviours “

On cyber security, which is becoming a growing issue for all organisations she believes it will be high on the agenda for anyone handling customer data. “It’s a critical part of any business.”

Unexpected issues include “low pricing”

So are there any unexpected things that have been thrown up since market opening that Water Plus has been surprised by?

Amies-King immediately identifies two things in particular:

“Firstly, the unexpected scale of large corporate multi-site businesses coming to market in the first three months surprised us but we were able to accommodate the sheer volume of bids and tenders that needed speedy turnaround and quite complex pricing due to our size,” she says.

She goes on to flag up pricing as the other area - “We’ve seen some players in the market offering what we would consider to be extremely low prices.”

According to Amies-King, the firm has seen some tenders that “we wouldn’t be happy to take on” adding that: “we don’t think those kind of levels are sustainable in the future.”

However, with a number of large customers, decisions were not simply about price.

“They are very careful about who they place their bids with especially if they’ve got lots of sites. I do see a level of caution around who they place their business with because they want to make sure that that company is big enough and has the standing to be able to service it.”

Market needs time to develop

Looking ahead, in Amies-King’s opinion while the sector has “done a great job of getting to where we are we now, we need to give the market time to develop before making an assessment of the effectiveness of the retail market.“

“Effectiveness to me would be assessed on levels of customer awareness across the country, levels of renegotiation – they may not switch but they may have renegotiated.”

“I’ve no doubt that competition will result in better service and more innovation for customers.

"There is also a huge opportunity to work with businesses to reduce their water consumption which supports the water efficiency agenda and has the potential to deliver significant cost savings to customers."

The Water Plus CEO was understandably guarded about the firm’s future plans for growth and expansion, confining herself to saying:

“We are determined to continue to play a key part in making the largest competitive water market in the world a success for customers and for the sector."