Monopolies are not usually known to provide their customers with the best deals. But at present organisations in England have no real choice on their local water and wastewater suppliers.
This is all about to change. The Water Act 2014 will allow England to introduce full competition into the water market in April 2017, following in the footsteps of Scotland in 2008. This new market will allow 1.2 million public sector organisations, businesses and charities to choose their supplier, creating the largest retail water market in the world.
Open Water – a body set up by the government to deliver a competitive market – estimates this will deliver around £200 million of overall benefits to customers and the UK economy. In principle deregulation does allow for increased competition, which can drive efficiencies and reduce costs. But how can the public sector extract value from these changes?
Some are rightly cautious about what deregulation can achieve. Inertia can be punished, as has been seen by the higher gas prices paid by the surprisingly high proportion of customers that still haven’t switched suppliers 15 years after energy market deregulation.
However, there are certainly savings to be made. Scotland appears to have already reaped the benefits of water deregulation. Business Stream, the arm of Scottish Water that deals with business and public sector customers, claims that in the six years following deregulation it was able to cut £100 million from customer bills. This was principally a result of water efficiency measures and price discounts. Those savings also translated into an overall reduction in use of 20 billion litres of water, which equates to 34,000 tonnes of carbon.
The advantages from putting a focus on good water management can spill over to other areas of sustainability. For example, the carbon and energy impact of water is an important reason to improve efficiency. Although water itself is comparatively cheap in the UK, treating, heating, and transporting it requires energy. This means that inefficient water use results in the higher energy costs and increased carbon emissions.
Beyond this is not just the direct impact of water consumption on climate change that needs to be considered. The consequences of climate change will change temperature and rainfall patterns, which can contribute to increased risks of flooding or droughts. Already in some areas of the UK the pressure on local water supplies has intensified to the point where water scarcity is a serious issue. For example, London is one of the world’s largest cities facing water stress – a factor of comparatively low rainfall, high population density, and a lack of abundant nearby water resources. Reducing water consumption is therefore a useful strategy to mitigate against the severity of these future impacts.
This is clearly a topic of interest for the public sector. The Water Forum on the Carbon Trust’s Public Sector Network, with support from United Utilities, is home to a number of lively efficiency-related discussions. Recent topics range from improving metering and monitoring, to the use of boreholes and rainwater harvesting. Another hot topic for discussion has been on the pros and cons of waterless urinals and whether they are worth considering. Although some have claimed that the installation and maintenance cost of a new waterless system has been one third of the cost of the original water consumption, others have found savings eroded as a result of the cost of the chemicals needed to clean the systems.
Whatever the specific measures implemented, deregulation creates a moment of opportunity for public sector organisations to take charge of water consumption. Scotland’s example shows that engaging with competition on the open market should be able to bring many organisations immediate cost savings, particularly if shopping around is coupled with improving efficiency. It is broadly in the interest of water companies to support higher quality management, so even if it is not offered then it is worth asking for advice and assistance. This will help you to ensure that when it comes to water, you won’t be putting money down the drain.
This article first appeared in Public Sector Executive on 10th June 2016.