Review of incumbent company support for effective markets

Markets can help everyone in the water sector meet the strategic challenges we face. Markets can deliver benefits for customers, society and the environment in the form of innovation, improved company performance, greater choice and quality of service as well as lower prices.

The developer services markets are well established, the business retail market opened in April 2017 and we have identified much more potential in markets for water resources and bioresources.

Incumbent water companies need to actively support these markets if they are to work well and deliver improved outcomes for customers, society and the environment. However, in early 2019 we were finding numerous examples where this was not happening.

In May 2019 our CEO Rachel Fletcher wrote to the 15 English companies to make it clear that overall levels of support for markets at that time were unacceptable. The letter challenged companies to improve and asked them to provide evidence to demonstrate where and how they were actively supporting markets. More information on the background to the review can be found here.

Following a more detailed information request, the incumbent water companies and other stakeholders submitted information and evidence to inform our review. The submissions can be found below.

We have now published the results from our review of incumbent company support for effective markets. In addition, we have published letters to each company below, which identifies areas where each has performed well and areas that need attention. We encourage companies to review each other’s letters to learn from the examples of good practice identified.

The headline findings are as follows:

• There are real differences between companies and within companies in their approach to supporting markets, with some companies performing much better than others.
• Collaboration can support markets and so benefit customers. But too many water companies are incorrectly using competition law as reason not to collaborate or as reason not to be more responsive of the needs and specific circumstances of individual market participants.
• Too few companies embrace markets and the role they can play in helping them address the strategic issues they are facing. Companies need greater commitment at senior or board level to support these markets and to do so in a way that goes beyond compliance.

The main report published today sets out a number of next steps. Ofwat will use the information gathered during this project to explore ways of making incumbent company support for markets more visible to all stakeholders going forward.