In the third in a series of articles based around an extended interview with Mark Powles, the Chief Executive of Business Stream discusses the services it provides to customers and the need for greater innovation in the marketplace.

 Q: Obviously in Scotland it’s been a success and Ofwat holds Scotland up as a model for competition. Are there any really significant differences between England and Scotland which are going to mitigate against success?

Mark Powles:

We switched our first customer in England under the current regime - Bernard Matthews. Our contact there would say that he’s now got a supplier that treats him like a valued customer, that he’s got a dedicated account manager on hand, a personalised online billing service and access to our innovative solutions experts, who are working with him to reduce Bernard Matthew’s water consumption and costs.

In fact, we’ve just commissioned a borehole for them, we’re looking at recycling, waste management and we’re building a relationship with them as their water partner, as opposed to just being their supplier. Bernard Matthews are interested in producing turkeys for the retail trade, we do water – and that marriage workswell. We’re very much trying to position ourselves in England and in Scotland as “your water partner, your water expert’. We want customers to feel that they’re free to focus on their core business whilst we’ll take care of their water for them.

Q: Are you seeing more need for smart technologies?

Mark Powles:

In truth, I think we’re behind the energy sector in terms of smart metering and the technology needs to catch up. That said, it’s more complicated in the water industry. A smart meter in water sits in a hostile environment – not a warm cosy one – and it needs to be quite robust.

And progress has definitely been made. At Business Stream, we’ve deployed smart meters across 7000 sites so far and we’re now making sure that data goes directly into our billing system so that we ultimately eliminate estimated reads. In our online portal, My business stream, you can now get access to consumption data every 15 minutes.

Q. So your customers can access the data independently of you?

Mark Powles:

They can indeed. We believe it’s important that our customers can take control of their water in order to identify efficiency savings – but we also have a team that supports our customers and picks out anomalies that could be reason for concern. We use that to deploy water efficiency strategies to help our customers reduce their water spend, or hit compliance and environmental targets.

Q. So if you see a spike somewhere where you’re not expecting to see it, you then immediately contact the customer?

Mark Powles:

Yes, we have an alarm service that lets both us and the customer know straight away that there’s an anomaly in their consumption – so we can jump on it quickly.

Water consumption needs to be looked at proactively – leaks obviously are low-hanging fruit for saving the customer money. But one of the bigger prizes is using consumption data on a multi-site estate to identify trends, averages, spikes and comparisons between locations to identify other efficiency and money saving opportunities. And as these opportunities are identified we’re keen of course to continue working with our customers in innovative ways to help them reduce their water use.

For example, Glasgow City Council, one of our biggest customers, knew they were using too much water, but didn’t have the capital to invest in the solutions needed to reduce it. So we said we’d provide our capital, our expertise, at our risk, and guarantee them a minimum level of savings. We committed to only getting paid if we exceeded our predicted savings….we saved them around £1.4 million.

Q: So you financed the equipment that needed to be put in place?

Mark Powles:

Yes. We chose to do it at our risk through our gainshare finance model. In England, the regulated companies currently get their money back in their income stream. But we offer options such as gainshare because if we don’t do it, someone else will – and ultimately, it’s our job to help the customer reduce its water consumption. I obviously have to make sure I make a commercial case out of such initiatives – but no regulator is telling me what my overall funding package is.

Q: Not a scenario water companies in England would normally consider?

Mark Powles:

Think about it – a monopoly water company does things to customers – we do things with and for our customers. We have to listen to them and tailor our services to them because they’ve got a choice. So if we haven’t got a ‘killer app’ for them, they’ll go elsewhere. We always say that the measure of success in a competitive market isn’t just necessarily switching customers, it’s whether or not the customers feel the benefit at a price level, at a service level and at an innovation level.

The previous water minister, Richard Benyon, has talked about this – groups have now been set up that are looking at innovation, R & D and technology. It’s for the industry to embrace that and to embrace the supply chain and then deploy it.

Q. There is a perception that the water companies in England and Wales won’t innovate themselves, their R&D spend is small, so they look to the supply chain - which to a certain extent is struggling with the AMP investment cycles – to innovate. When the supply chain does innovate they then turn round and say ‘we’re not using that it’s far too risky.’

Mark Powles:

Since privatisation, the water industry has been a success story with £108 billion worth of investment – but I agree, it’s a question of where priorities lie. The infrastructure is more robust than it’s ever been. There’s a long way to go and we don’t want to damage that, but at the same time we’ve got to make sure that customers feel the benefits - and that’s where retail competition comes in.

We really have to work and partner with customers now – otherwise they won’t stay with us. Anyone who has a technological breakthrough that’s going to help our customers, then we’re interested in it, we’re the route to market with those businesses.

Innovation is a core part of what we do – I’ve been in retailing for 30 years and if you don’t innovate, you die.

Q. The UK water sector seems to lack focus in this compared to other water sectors elsewhere which seem to be far more integrated. Canada for example, the Watertap initiative in Ontario where they’ve got 43 research centres, 900-plus companies and they really brand themselves as Water Ontario. What’s needed in the UK?

Mark Powles:

When Martin Cave undertook his review he wasn’t just looking at market forces to drive better value – he was also looking at how you get more innovation. He said there needs to be far more focus on bringing R&D into the industry and driving new solutions. I think retail competition will help with that to an extent, as will the upstream elements of competition.

Upstream will be addressed post 2019, i.e. at the next Price Review. I don’t think you can eat the elephant in one bite – it’s sensible to start with the customer and let that drive down through the supply chain.

And we can’t rush it – because if we try and do everything in one fell swoop it will fail and we all want an orderly opening of the market.

The industry has done well to invest and bring infrastructure up to a certain level. We need to recognise that parts of the country now are water-stressed. Water security, resilience from flooding to drought are really big important issues now. I think the Government has been very good at trying to put together a holistic strategy for the industry and that’s not really been done before. The White Paper ‘Water for Life’ gave a very good picture of that - like everything, you start off with the big vision and then you start to package it into bite-size chunks.

Defra has made some changes to the Water Bill, they’ve increased the resilience issue and I think that’s been welcomed.

However I still think they need to define the upstream a little more closely – purely my personal opinion. I think that’s one of the reasons why it’s post 2019 to give more time for the industry and Government to engage, to get something that’s going to work and isn’t going to destabilise what’s already been achieved.