Households in England could save £8 a year if the water and sewerage market is opened to competition, the industry regulator has said.
Currently, households can’t choose their water and sewerage provider; they’re limited to the provider that serves their local area.
But in a report requested by the government, Ofwat says opening the market to competition could save £2.9bn over 30 years, which amounts to £8 per household, per year.
While this is only a small saving, Ofwat says this would give people the freedom to choose their supplier – ending the final retail monopoly. Customer research suggests that 56% think having choice would be a good thing.
From April 2017, most non-household customers of suppliers based wholly or mainly in England will be able to choose both their water and wastewater retailer.
The regulator adds that the move could also lead to innovation, improved customer service, and new offers – such as the bundling of energy and telecoms products with water.
Cathryn Ross, chief executive of Ofwat, says: “We are living in an age of retail revolution, but water customers are being left behind.
“The service offers from water companies can feel behind the curve compared to the innovation customers benefit from when buying other goods. The uncomfortable truth is that, when it comes to retail offers, water companies provide an analogue service in a digital age.”
‘Significant costs to consider’
It is now up to the government to decide whether it wants to introduce competition and, if so, how and when to do so.
According to Ofwat, the government did consider this in 2002, but decided that the cost and complexity of introducing competition would outweigh any benefits.
Setting up a new market would involve significant costs, which Ofwat says would ultimately fall on companies and customers.
Ms Ross adds: “There are significant costs to be considered, and it will be important to ensure that customers are treated fairly in a competitive market and that vulnerable customers are protected. The decision for the government to make is whether the potential benefits outweigh the costs and risks.”
A spokesperson for Water UK, which represents the water industry, says: "Extending retail competition to over 20 million households could secure potential benefits for domestic customers, but would also be a major undertaking and so deserves to be given very careful consideration.
"We look forward to a timely decision from the government which helps sustain the stability the industry needs to continue successfully meeting the needs of its customers."