The independent Strategic Panel, the most senior governance group in the Business Retail Market, is warning the Independent Commission’s water sector review led by Sir Jon Cunliffe against returning all but the very largest business customers (using >50Ml/year) to incumbent monopoly providers, making the case why businesses of all sizes should remain in the market.

The warning comes in the response from the most senior governance group in the Business Retail Market to the Independent Commission’s call for evidence. The Panel has focused on solutions for water efficiency and on the scope of the market, given the Commission’s question on whether all but the very largest business customers should be removed from the market.

The Strategic Panel commented:

“The Panel strongly believes that keeping business customers of all sizes in the BRM in England is important to deliver improved outcomes for existing and future customers, the market, the environment and to enable the government’s growth agenda. The Panel’s response sets out evidence that the market is delivering customer benefit and highlights what more needs to be done, reflecting its Roadmap to a Flourishing Market, and the opportunity to follow the evolution of the business water market in Scotland.”

Turning to the options to support greater water efficiency, the Panel sets out the need for, and makes recommendations on, increased coordination, financial incentives, a more urgent review of wholesaler tariffs and policy leadership from government to build on the natural incentives for businesses to reduce usage. Referring to the need for a review of wholesaler tariffs, the Panel says this would need to be supported by an incentive framework that creates the conditions for retailers (and third parties) to unlock the water saving potential of their customers.

MOSL says Government should improve market profitability by increasing retailer margins for retailers serving smaller customers

MOSL submitted its response to the Independent Commission’s Call for Evidence on 23 April in the form of a cover letter and answers to over 30 of the Call for Evidence questions. MOSL and the Strategic Panel reflect broadly similar views in their individual responses.

Key points on the BRM highlighted by MOSL include:

• We do not believe that limiting the market to large customers (those using over >50 ML/year) will improve outcomes for the sector
• There is no evidence to suggest smaller customers will be better served in the household market
• Data from the Central Market Agency (CMA) shows switching for small customers in Scotland started slowly (comparable to England). The market started to flourish in 2014/15 (seven years after market opening)

According to MOSL, rather than considering proposals to reduce the size of the market, the Government should focus on:

• Improving the profitability of the market by increasing the retailer margins for those who serve smaller customers, allowing these customers to benefit from competition
• Exploring how the BRM can support better outcomes for the efficient use of water, as outlined in our wider regulatory recommendations
• Raising awareness of the market to support greater engagement from all customers, in particular, smaller customers (amongst whom awareness is lower) in order to generate further competition and support the market’s ‘investability’.