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Companies in Scotland could save £m on water costs by switching their water supplier, why is the take up so low?

Author:  Graham Mann, Water Audit Expert.

There are at least 100,000 business customers in Scotland that have potential to save over 20% on their water and waste water charges.

Since 1^st April all the business customer have been able to choose their water and waste water supplier as the water retail market was opened up to competition as with the gas and power industries. All businesses across Scotland would benefit from the change. There are now 13 licensed water and waste water suppliers in Scotland which should mean attractive savings above and beyond the default rate by the incumbent supplier Business Stream, however in some instances this is simply not the case.

Why is this? Over the last year expert water consultants at H²O Building Services have been involved in advising business customers on switching their water supplier for properties in Scotland.

H²O have switched nearly £2 million worth of water supply contracts over the last few months with a further £3 million in the pipeline, providing a safety net for business customers wishing to reduce costs by providing guidance and expert advice. There are many areas of concern, in any new market opportunity when there is a flurry of new businesses forming but the problem seems to be there is no real water consultancy expertise, the offers are all based on price and we are in real danger of the new entrants going bust as they will run out of cash as paying the wholesaler in advance then collecting monies from customers on small margins is not good news for the customer. This maybe having a real impact on the market opportunity to switch and businesses preferring to stay with their incumbent supplier which makes perfect sense from a business perspective.

There are a great many businesses that have both switched supplier and negotiated discount rates with the incumbent supplier Business Stream in return for a 4/5 year deal.

Time has moved on and more providers have entered the market and can easily undercut their long term deals by a considerable margin.

H²O has seen deals of 5.25% to 6.25% whereas now dependant on the wholesale margin the average appears to be 16%, some as high as 21%. If the wholesale margin is 28% then a retail sale of 21% leaves 7% for costs and profit, no business can be sustained on such low margins.

There is simply not enough business in Scotland shared amongst 13 licenced providers, many of which are not conversant with charges and tariffs and when they take customers from the incumbent supplier continue to charge incorrectly, the overcharges seen by water auditing at H²O have been substantial, in one case over £ 20,000.

Conversely, substantial undercharging has been noted, in a recent client acquisition by H²O the client had budgeted for accruals of £ 30,000 when in fact £ 80,000 would be nearer the mark.

There are a great numbers of businesses in Scotland that are being both overcharged and undercharged, probably in equal measure, the very last thing a business would consider is to approach various licensed providers to quote for their water supply contract if there was any risk of substantial back charges which there is and indeed there will be those businesses staying put rather than rocking the boat and drawing attention to their water accounts.

Only last week H²O was approached to provide a brokered switch water supplier rate for a Leisure Company with a spend of £ 150,000 per annum, water bills were provided by the customer and a thorough water audit was completed. The first thing was to determine if the charges levied at present were correct, the overall results were quite amazing as other water licenced providers were also quoting for the business.

H²O brokered a deal at 16% with another water supplier in addition savings of £ 25,000 per year were identified plus a refund of £65,000. A back charge liability was also identified of £ 40,000.

A small recently formed company that obtained a licence to become a water retailer had quoted a discount of 18% but had not even reported on the potential saving and refunds or the back charge, clearly demonstrating a very serious situation for this customer, who is only focused on the discount percentage rate and not the whole picture. It is of little or no interest to the new water supplier as their only focus is to secure the customer on their books. There will be little interest in looking at ways to reduce the customers charges which would thereby reducing the water suppliers income or indeed challenging the back charge as this is further income reduction, and this is where the serious financial problems are.

• Lack of industry expertise and intimate knowledge of charge structure.
• No expertise to carry out historical water audits to ensure the charges that are levied are correct both from an overcharges or undercharge perspective.
• No real drive to reduce the customer’s charges due to the effect of reducing income of the new licenced water provider. It is counterproductive to the business mainly those less established water providers, that do not have the financial  resources and backing of the big water companies that have funding companies to retail water in Scotland.

To add further confusion in the Scottish water market it was published in the media recently that Thames Water have signed a commercial deal with a Scottish business man Mr John Wyllie, if we can believe the media Mr Wyllie is going to “burst open the water market” according to Energy Live News, claiming that the new business deal could see Thames Water “wedge a crowbar into the tightly sealed market north of the border”.

These comments are really quite farfetched, there is nothing ground breaking brokering water supply contracts with licenced providers such as Thames Water or any other licenced providers, and indeed we seem to be going down the same old road of individuals entering into the water market, promising the earth and delivering the same products and services that already exists at present. The only good that may come out of this move by Thames Water and Mr Wyllies new water brokering business Water24 will be to draw the attention of many more businesses to the fact that potentially by switching water supplier savings can be made. However this joint venture will do nothing to promote the positive and negative effects of switching or indeed providing an expert water audit and true cost cutting service that can be completed by water experts.

Graham Mann, water expert with 30 years’ experience within the water industry and heading up industry leading H²O Building Services has spent the last 9 months studying in great detail the Scottish water market and has now instigated a fresh approach for business customers in Scotland and has effectively “thrown down the gauntlet to its competitors and licenced providers” by

• Setting the high standards that others may follow.
• Delivering customers the maximum savings and refunds.
• Delivering to customers the best discounts possible on the water and waste water charges.
• Providing customers expert advice to
• Reduce existing charges going forwards.
• Identify any potential back charges.
• Guaranteeing the best possible discount on water charges against any other competitor dependant on water usage profile.

Graham Mann says “We will upon receipt of the customer’s water bills tell them the potential savings we can achieve on their existing charges and any back charge liabilities they have, no other water companies will tell customers this!

We will then assist them in achieving any savings and refunds and advise them on the strategy for reducing or indeed avoiding any back charges, no other water company will tell customers this!

We will then, having delivered the savings and refunds and resolved any back charge liabilities provide further savings going forwards by delivering the best possible discount percentage available in the market above any of our competitors! Giving the customers the highest standards of quality, service and water expertise that does not exist in the market.

We expect to be judged on our results, our message to customers is clear, if your business is in a water contract with any water supplier talk to us in complete confidence, chances are we will advise you on significant savings on your water supply charges. Indeed if your business is paying default charges and is considering switching talk to us as we will ensure you access a discount on your water and waste water charges more than anybody else can deliver”.

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