The Water Act 2014 has finally received Royal Assent. It introduces a new era of competition into the English water market from 2017. But this will only apply to business customers and is unlikely to make a major difference.
It does open up the possibility that water companies could split into down stream retailers – those who meter and bill water - from those who prefer to only operate upstream, in abstraction, storage, treatment and distribution. This could bring about unintended consequences in that the interests of a retailer are very different from a wholesaler of water.
Given that water is a commodity the only real way to differentiate is to compete on price – why else would a business customer change supplier? This means that retailers will constantly seek to reduce costs and find lower cost wholesalers. But the interests of wholesalers are very different. Investing in water treatment is inevitably a long term decision given that the life of the assets created is measured in 10’s of years. They are looking for steady returns and need to take long term investment decisions. But with retailers looking to reduce costs it will make it very difficult for wholesalers to take a long term view. This could lead to essential maintenance being put off and investment in replacing worn out water mains delayed increasing the risk of an unexpected breakdown. Is this really in the best interest of customers?