Utility Week   ‘There are “major problems” with domestic reform in the water market

Chief executive of The Water Retail Company, Lord Redesdale. Domestic water competition is “dead in the water” following the outcome of the general election, a senior water boss has insisted. “I would say it is highly unlikely that it will be rolled out by 2020, and there is a real question mark over whether it will happen at all,” Lord Redesdale, chief executive of The Water Retail Company told Utility Week.

He said domestic competition was not a priority, as the government will be focussed on Brexit negotiations. “It’s not going to happen,” he added.

Redesdale, who is also the former energy spokesperson for the Liberal Democrats, said there are “two major problems” with the domestic water market. “One is that the learning from the business market is that the margins are very difficult to make the business case for. The second is that there’s not going to be the legislative will or timescale to be able to do it.”

The government first mooted the idea of domestic competition in 2015, when it proposed the market should open by 2020.

Since then, few updates have been given on government’s thinking about the proposal, causing some commentators to speculate that the concept had been quietly dropped by the new administration.

The lack of a formal announcement from the government has evoked a feeling of restlessness within the industry, with Ofwat chief executive Cathryn Ross calling for a swift decision on whether the government will proceed with plans. Meanwhile, water minister Therese Coffey, who remains MP for Suffolk Coastal after winning 57 per cent of the vote, has insisted that the idea is “still on the government’s agenda”.

Recent research conducted by Economic Insight, on behalf of Southern Water, suggested savings could be as high as £150 per year per household, if water is bundled with energy and broadband.

However, Redesdale argued that bundled services only work for “massive players”. “So, if you go down the bundled [services route], prepare for a big six water scenario,” he said.

Asked how he saw things playing out, Redesdale said he would “put money on Theresa May going for a minority government”. “It’s either that or give up,” he said. “She’ll have the DUP [Democratic Unionist Party] on board, but [the Conservatives will] be very wary of that because [the DUP’s] price tag is going to be very high.”

He said the best outcome for the utilities sector would be if nothing were to happen. “Although there is a slight problem, which is that both sides [Conservative and Labour] are up for hitting utilities on behalf of consumers.”

The Conservatives are set to implement an “absolute price cap” on energy retailers in the wake of the general election. Speaking exclusively to Utility Week last night, business and energy secretary Greg Clark said: “We will get Ofgem to set an absolute cap.” Meanwhile, Labour is exploring moves to rail franchise-style time network licenses and a “limited” cap on household bills.

Castle Water chief executive John Reynolds told Utility Week the impact of the hung parliament on the water retail sector will be “no real change”. “The reality is that the Conservatives are by far the largest party, they will probably form an alliance with the Ulster unionists, so that’s not going to change policy,” he said. “There is no legislative capability for major changes because of the amount of work going into Brexit. It is very unlikely that there will be a change.