Photo courtesy Southern Water
Thames has won a license to
start selling water across England and Wales. The move is in response to Defra
allowing companies that use more than 5 MGl per year to buy their water from a
third party. But will this really drive down costs for companies like Coke Cola
or Tesco?
For a nationwide company to
have just one supplier and a combined bill may help it understand where its
using water and where savings are possible. But the cost of the water will not
reduce significantly by competition. The water companies will still have to buy
the water from an existing water company. It will be exactly the same water
being supplied to a factory as is currently the case it is just the bill that
will come from another supplier say Thames Water.
The problem is that the cost
of water is dominated by the fixed costs of maintaining and investing in the
infrastructure. Billing costs are relatively trivial. Look at what has happened
in Scotland. When Business Stream the industrial retail arm was separated from
Scottish Water, significant one off costs were incurred that Ofwat estimates
will take over four years to pay back. Worse annual costs were also higher due
to the complexity of the new systems and new IT costs. The net saving was only
£4 million a year. This is less than 0.5% off water bills. Would you switch
water suppliers for a saving of 0.5% off your bill?
In the view of this blog
competition is an unnecessary distraction for the water companies. It would be
better that they should focus on their core business and drive down their costs
for 99% of the business not waste management time focussing on the roughly 1%
represented by the cost of sales
Some handy tips on water and our environment http://www.living-water.co.uk/blogs/topic/environmental-matters
ReplyDeleteIf you are interested in knowing more, you can get plenty of information here http://www.living-water.co.uk/blogs/topic/water-industry
ReplyDeleteIn answer to your question, YES, I would switch water suppliers for a saving of 0.5% off my bill. I have found out today that Yorkshire Water made £650 EXTRA a year from me as a customer by actively deciding not to tell me that the water sure scheme was available to a single parent of 4 young children unfortunate to be living on income support, because I was not on a water meter. I am informed that they will stand by their company policy of not informing customers about the water sure incentive (however much they are struggling), unless they are already on a meter. Currently I have no option, that I am aware of, than to continue purchasing my water from Yorkshire Water (a company I consider to be an unethical). In giving consumers a choice, companies that now have a monopoly would have to become more customer focused ... this competition in turn could well focus water companies, rather than "distracting" them as the public vote on efficiency and service with their feet.
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