The members of Market Operator Services Ltd (MOSL) have approved the 2017/18 business plan which outlines how it intends to deliver its responsibilities while managing the heightened risks and uncertainties in the first year of the new competitive water market - the plan has flagged up the actual volume of operations and data quality as potential issues.

MOSL’s role will evolve to become the enduring (ongoing) market operator from April 2017 - the market operator performs a critical function for the market, enabling the accurate settlement of £2.4 billion of revenue each year.

As well as ensuring compliance and maintenance of the market codes, MOSL’s systems and processes are involved at numerous stages of a customer’s lifecycle

As the market operator, MOSL must balance the needs of the market with those of participants, from the largest incumbent wholesaler to the smallest new entrant, in order to ensure that all companies are able to enter, exit and participate freely in the market.

The business plan says that MOSL considers regulatory intervention to be “a sign of market failure” – the operator is aiming to minimise the risk of such intervention, and the associated cost and disruption, by making market data transparent and available in real time.

MOSL has proposed a revised final total budget of £13.7 million, representing a £3.8 million reduction compared to the original proposal, in order to deliver the 2017/18 business plan. This includes a base budget of £10.2 million, a contingency fund of £2.0 million and a capped allowance of £1.5 million for a full market audit.

“Speed and effectiveness of companies’ responses to challenges that arise in the new market will vary considerably"

A key part of MOSL’s role is to de-risk the market during a period of significant change and uncertainty for its members, according to the plan, which states:

“The speed and effectiveness of companies’ responses to the challenges that arise in the new market will vary considerably. This variation will inevitably result in an inefficient response to issues by the industry as a whole and multiply the time and cost involved in finding solutions.”

MOSL intends to insulate the industry from time delays and increased costs by agreeing and holding contingency funds centrally so that it can react to members’ needs and protect the market more quickly than if funds needed to be agreed and collected on an ad-hoc basis.

The speed of response would be particularly important when dealing with issues that could potentially affect the financial viability of a trading party or have a market-level impact on end customers.

MOSL’s intention to ensure that the majority of companies are not burdened by costs incurred by the minority. Where an issue or commissioning cost can be ascribed to an individual company or companies, the operator will adopt a ‘polluter pays’ principle to recover the costs and replenish any contingency that has been used.

Among a number of key risks flagged up in the plan which could potentially impact the new market, the most significant ‘unknown’ is the actual volume of operations in which MOSL will be involved, particularly in 2017/18. Data quality has also been identified as a potential issue – the plan says MOSL may need to intervene if the market data set is corrupted or market behaviours create significant data quality issues.

Significant customer switching in the early stages of the market may highlight data quality issues that could result in a poor customer experience, the plan says.

It also refers to a number of potential changes within the UK water industry, that may have a significant impact on MOSL operations, and the operation of the market, including:

• Household retail market opening
• Sludge market opening
• Water abstraction market opening.

The plan states:

“It is not currently clear how, when, and to what extent these changes will be implemented. These changes have therefore been excluded from the business plan for 2017/18.”

“Notwithstanding this, MOSL will not put any measures in place that will constrain any of these emerging regulatory initatives.”