The provision of commercial water was deregulated in England and Wales in 2017 following the lead of Scotland, where it had happened in 2008. Previous to this, business water rates were regulated much in the same way as domestic water rates – with some exceptions being granted to large businesses. Businesses that used over 50 megaliters of water every year were allowed to shop around for suppliers from 2003 onwards, but this provision was not extended to smaller companies. The 2017 deregulation was far more than a policy of exception. It allowed all businesses to shop around for a water supplier beyond their local water authority. Here is a quick guide to the impact this deregulation has had.
Why Was Commercial Water Deregulated?
Before understanding the impact of water deregulation in the commercial sector, it is important to understand why the idea was floated in the first place. Deregulation has a rocky history in the UK. The deregulation of council housing ownership and the railways between the 1960s and 1980s are largely considered to have been failed experiments in market diversification. Why, then, would a government attempt a similar thing with business water rates in 2017? The answer is large-scale inefficiency. Companies and water providers alike were failing to make their systems efficient because there was no competition between providers and no benefit to the mass auditing of water expenditure.
Competition breeds choice – at least in theory. The new deregulated commercial water provision industry is awash with providers offering unique plans and rates. Business leaders can use services such as Utility Bidder to compare the different offers available to ensure that they are getting the best possible price.
This competition and choice, in turn, provokes a general lowering of commercial water prices. This may or may not be temporary, depending on broader economic factors. Businesses in the UK now spend considerably less money on water in comparison to 2017 figures, thanks to the competitive pricing inherent in the deregulated market.
The competitive nature of the market means that water providers have more of an impetus to improve the services they provide. Water service providers and businesses alike are more likely to audit their water provision plans in order to identify areas where efficiency can be improved in a deregulated market. Plenty of consultancies offer water auditing services to individual businesses, and some providers will happily conduct a water audit in order to ensure that they are able to provide a more efficient service.
Deregulated markets are typically less secure than regulated ones. Deregulation means that a market is highly vulnerable to economic peaks and troughs and even more susceptible to the poison of greed. Luckily, the deregulated commercial water market is essentially piggybacking on the shoulders of a highly regulated one. Private water providers still have to buy the water they offer to businesses for wholesale prices from highly regulated local water companies such as Thames Water. They are essentially beholden to some degree of regulation.