The Water Market: Understanding the Market

Graphs showing the water market

When the water market was deregulated in 2017, it caused huge changes to the water market and how it works. But it can still be a bit confusing to figure out exactly how it works. Here’s Flame Energy’s complete guide to the water market to help you make sure you’re getting the best deals for your business water contracts.

How does the water market work?

Like other open utility markets, the water market works by suppliers buying wholesale services. They will then offer those services to eligible customers in a package. This is a similar scenario to how the electricity, gas and telecoms market works.

For non-eligible customers and households, the regional water company will cover their water supply and management. According to Ofwat, in order to be eligible to switch from your regional water company, you must be:

  • Business customers who are supplied by an appointed company whose area is wholly or mainly in England.
  • Business customers who are supplied by an appointed company whose are is wholly or mainly in Wales and use a minimum of 50 mega litres of water a year.

How did deregulation effect the water market?

April 2017 saw the deregulation of the water market. Because of this, around 1.2 million businesses could shop around for their water contracts as they were no longer tied in with the water supplier with the regional monopoly. This has given more power to the customer as they can switch suppliers if they’re not happy with the service or prices their supplier is offering.

A photo of water in the ocean
Graphs on a clipboard

What makes up the water market?

The water market consists of three main parties alongside different regulators and government bodies. The first of the three main parties are the customers. There are approximately 1.2 million non-household customers across England who are eligible to switch their water provider. The retail suppliers will then compete for these non-household customers. They will provide the services they have purchased from wholesalers. These are companies that own and operate the networks that provide the water.

The UK Government set up Open Water to open the business retail market. Three partner organisations led the programme, Ofwat, MOSL and Defra (Department for the Environment, Food and Rural Affairs). Ofwat is the economic regulator. They set maximum prices and issue licences for retailers to compete in the market. MOSL is the market operator who ensure that the market is functioning efficiently.

What regulatory support is available?

Ofwat is the main regulator for the business retail market. They’ll intervene in the market when needed to ensure everything is fair. The regulating body have set out limits for how much customers will need to pay if they do not switch or secure a new deal once their contract has ended. This works in a similar way to how Ofgem have placed rules on Out of Contract rates in the energy market.

Can I switch suppliers?

If you’re wanting to switch your water supplier, you’ll need to make sure that your business property is located in England or Scotland and is not primarily used as home. This usually includes businesses, charities, and public sector organisations. The process of switching your supplier is usually a quick and simple process. You can even add multiple sites to your contract now to make the billing process even more efficient. Once you’ve switched, there’ll be a ‘cooling off period’, usually 7 days, where you’re free to back out the contract.

Contact us

Want to take advantage of the deregulation of the water market and switch your business water supplier? Flame Energy are here to help. We’ll look at every aspect of your water consumption and business requirements to make sure you’re getting the best deals on your water contracts. Contact our team of experts today to find out more.

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