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Competition in the Water Industry part 4

The potential benefits of competition change in the UK water industry are similar to those achieved in the Energy sector (although that has not been without some issues), in that customers will be given choice between suppliers, and prices should be reduced. Customer services should also be improved, as that will be another way to attract customers.

There are however a few issues and challenges. For many commercial and practical reasons (such as installation costs and practicalities) any property is only ever likely to have one set of supply pipes and sewerage, and related treatment and pumping facilities. Thus the customer will have no choice as to who provides their infrastructure, even if the incumbent is sold, or sells off the area as an inset. The cost per property for that infrastructure will be variable, depending on location factors such as:

  • The availability and treatment cost of water;
  • The environmental constraints on discharge;
  • Geographical factors (e.g. terrain, population density);
  • The metres of pipe required to service each property (usually more in rural areas);
  • The age and condition of the existing infrastructure.

The competition regulation thus needs to be carefully constructed to ensure such issues do not create unreasonable cost differences between areas.

I will discuss how companies could achieve success in my final blog.

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