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Open Water
Introduction
Open Water represents the deregulation of the water retail market in England and Scotland, allowing businesses, charities, and public sector organisations the freedom to select from licenced water retailers instead of being restricted to a single regional provider. The deregulation separated retail and wholesale functions, allowing regional companies to continue managing water sourcing and treatment while allowing retailers to compete on services, such as billing and customer service.
In April 2017, England joined Scotland in deregulating its water retail market for non-household customers, following Scotland’s successful deregulation in 2008. The government initiative, known as Open Water, was led by three partner organisations, Ofwat, Defra, and MOSL. This was the most significant change in the water market, since privatisation in 1989. Historically, businesses had no choice over their water provider, as each region had an assigned water supplier for both wholesale and retail services. This lack of competition limited options for customers seeking more efficient, cost-effective, and customer-focused services. Today, organisations across England, Scotland, and certain large businesses in Wales can benefit from competitive pricing and service levels offered by various licenced retailers for water and wastewater services, including both incumbent water companies and new market entrants. In other words, they have the freedom to select a water retailer that best suits their needs.
This reform aimed to encourage competition, drove efficiency, improve service quality, drive down costs, and foster innovation within the water industry. It introduced services like water efficiency audits and leak detection to help businesses reduce usage and costs, as well as significant investment in infrastructure and technology.
On the other hand, the reform also raised concerns about the ability of smaller suppliers to compete with larger incumbents. To address this, the regulator implemented measures to ensure fair competition, including establishing a central market operator to provide equal access to the market for all suppliers. The new water market also brought complexities, requiring businesses to navigate various regulations, contracts, and supplier choices. To assist, the regulator introduced guidelines and support services to help businesses make informed decisions. Additional challenges of water deregulation include a lack of customer awareness about their ability to switch retailers and perceived minimal benefits, particularly for smaller customers with lower volumes. Finally, operational issues such as billing errors, inaccurate meter readings, unresolved complaints, and poor communication between wholesalers and retailers complicate the process. Nevertheless, deregulating the business water market in England and Scotland has been beneficial for introducing competition, promoting better service, increasing innovation, and driving investment in infrastructure and technology.
Key market players
Customers – Businesses, charities, public institutions and other non-household entities, eligible to choose their retail service supplier, allowing them to negotiate better deals, switch providers, and access additional services. Households remain outside of the competitive market and are not eligible to switch water suppliers.
Retail suppliers – Licenced entities that provide services such as billing, customer support, and water efficiency advice to non-household customers, purchasing wholesale water from regional companies and offering tailored packages and value-added services, in a competitive, deregulated market.
Wholesalers – Companies that manage the physical infrastructure, water supply and wastewater treatment. They do not deal directly with business customers, but sell water to licenced retailers, while ensuring reliable service within their regions.
DEFRA – Department for Environment, Food & Rural Affairs is a government department responsible for managing environmental protection, food safety, and rural affairs. It plays a key role in ensuring the sustainable management of the UK’s natural resources, including water, land, and biodiversity, and in shaping policies related to climate change, pollution control, and rural economies. It oversees the water market reform in England, ensuring legislative changes from the Water Act 2014 are implemented, and works with agencies like Ofwat and the Environment Agency to regulate the water industry.
Ofwat – Economic regulator and licensing authority for the water market in England and Wales. It oversees the market by setting charging guidelines, licensing regulations, and service standards, while ensuring water companies provide reliable services, fair prices, and meet legal obligations. Ofwat also works to raise awareness about the market, protect customers, and encourage competition and sustainability in the sector.
WICS – The Water Industry Commission for Scotland is the economic regulator for Scotland’s water market, ensuring efficient, sustainable, and fairly priced water services. WICS sets price limits, monitors performance, and promotes competition, aiming to maintain high-quality services and long-term sustainability for customers.
MOSL – Market Operator Services Limited is responsible for ensuring the efficient operation and stability of the non-household water market in England and Wales. It manages the central IT systems that facilitate the transfer of customer information during supplier switches, processes annual billing transactions, and ensures smooth interactions between water wholesalers and retailers. MOSL works alongside Defra and Ofwat to support the Open Water programme, overseeing market participation, compliance, and operational efficiency.
Rules and regulations
Since April 2017, the commercial water market has operated in a way that licenced retailers purchase wholesale water services from regional water companies or wholesalers. These retailers then create packages tailored to consumer needs, offering additional services to enhance their competitive edge.
The business retail water market now allows customers to select their preferred supplier for water and wastewater retail services. Despite this change, the underlying infrastructure and delivery systems for water supply remain unchanged, ensuring no disruption to service. Water wholesalers continue to be responsible for maintaining the infrastructure, including pipes and treatment plants, managing the physical supply of water, and treating wastewater. However, the new water retailers now handle billing, meter reading, customer service, water efficiency advice, and different types of value-added services, acting as the intermediary between customers and wholesalers.
All non-household customers in England and Scotland have both a water retailer and a water wholesaler. The Open Water Market is accessible to businesses, charities, public institutions, and large commercial facilities of various sizes, aiming to enhance the business water market through customer choice, protection, and fair competition. Eligible non-household customers can switch their water and wastewater retailer, with Welsh customers eligible only if they use over 50 million litres per year, while Northern Ireland’s water market remains closed. Regional water companies still serve non-eligible and household customers. Eligible customers who choose to stay with their current supplier are protected by a maximum price known as a default tariff for standard service. Customers who switch to a new supplier receive a formal contract from the retailer, detailing pricing and services, and enjoy the same legal protections as any other service agreement.
All retailers in the business retail water market must adhere to Ofwat’s Customer Protection Code of Practice, which includes measures that protect small to medium-sized businesses, such as limiting back-billing periods and ensuring clear contract terms and guaranteed service standards. Ofwat also promotes ethical practices by encouraging Third Party Intermediaries (TPIs) to join a voluntary agreement that prioritises customer interests. Additionally, Ofwat monitors the market performance, assessing targets and customer experience to maintain standards. All retailers must obtain a national water supply or sewerage licence from Ofwat to operate in England and Scotland. Both retailers and wholesalers must follow codes of practice regulating interactions between them, ensuring customer protection and equal treatment in the market.
Benefits of a deregulated market
Since deregulation, competition and customer choice have increased, with more retailers entering the market. Businesses now enjoy flexibility to negotiate better deals, bundle utilities, and consolidate suppliers across multiple locations, achieving financial, time and sustainability efficiencies. The main benefits of the deregulated market include:
- Flexibility – The open market allows businesses to choose from licenced water retailers that best meet their needs in terms of pricing, service, and value-added offerings, and provides the option to renegotiate contracts if they are dissatisfied with the service
- Cost savings -The introduction of competition in the water market leads to more competitive rates and customised pricing plans, offering potential cost savings for businesses
- New specialist services: Many water retailers introduce new value-added services like water efficiency advice, leak detection, and water management solutions, helping businesses optimise water usage, identify savings, and implement sustainable practices.
- Better service quality – Increased competition encourages retailers to provide high levels of service to attract and retain business clients.
- Tailored services – Customers benefit from solutions tailored to the specific needs and characteristics of the business, that enhance operational efficiency and bring more value.
- Improved customer service: Competition drives water retailers to stand out by offering exceptional customer service, including dedicated account managers, faster response times, and customised solutions, leading to an improved overall experience for businesses.
- Innovation – The market encourages retailers to innovate and develop new products, services, and use new technologies to benefit businesses and contribute to efficiency and sustainability goals.
- Legal protection – Regulatory bodies in the open water market ensure fair practices, consumer protection, and market stability, giving businesses confidence through oversight that maintains standards and addresses issues.
- Sustainability – The market encourages retailers to offer services that reduce water usage, lower carbon emissions, and utilise technology for water-saving initiatives, transparency and sustainability goals.
Going forward
The deregulation of the water industry has proven beneficial, providing businesses with more choice, greater efficiency, and solutions that are better tailored to their specific water needs. Since deregulation, new water retailers have entered the market, and competition has intensified. As a result, customer expectations have changed, with businesses now seeking more transparency, flexibility, and value from their water service providers.
On the other hand, although the deregulation happened in 2017, many eligible companies are still unaware of the deregulation and their ability to choose their water retailer. If you haven’t switched your business water supplier yet, you may not be benefiting from things like improved customer service, better pricing, and tailored solutions. By selecting the right water retailer, businesses can optimise their water management and maximise these benefits. The Water Retail Company is here to help, as we are specialised in helping businesses navigate the Open Water Market. With our expertise in managing complex portfolios and providing tailored solutions, we offer numerous advantages in meeting your unique business needs.