As of April 2017, U.K. businesses and organizations can choose their preferred provider of retail services for water and wastewater. While wholesale services continue to be delivered by the local water companies, non-household customers can now negotiate packages tailored to their unique business needs, including elements such as billing, meter reading, account management and value-added services.
Best practices for an integrated utility procurement strategy
Our market analysts have been working closely with leading organizations to take advantage of opportunities that this market change presents. The deregulation of water now provides organizations with an opportunity to evolve their procurement strategy beyond energy. Water, electricity and gas can now be integrated into one procurement strategy with increased efficiency and cost savings.
Our experts have outlined recommendations and best practices to consider when developing an integrated utility procurement strategy.
- Have the right data to control prices and reduce costs
A water retailer recently claimed that up to 10 percent of customer data has not been uploaded onto CMOS (Central Market Operating System). This causes significant problems with pricing by the retailers, as well as delays to both transfers & billing. Some customers have complained they have not been billed since April. Customers need a firm grasp of their own data to ensure retailers can price against an accurate data set and to manage the transfer of SPIDs (Supply Point Identification Number) on CMOS through to billing. If customers do not understand their own data, then they run the risk of significant disruption to their billing.
Similar challenges are present when procuring electricity and gas. Incomplete, inaccurate or missing data will likely result in delays in getting prices from energy suppliers and almost certainly impact the costs that underpin the final price customers pay. The potential negative consequences will grow as non-commodity costs increase in relative and absolute terms.
- Do your research
More than 20 companies have applied for water retail licenses, ranging from wholesale subsidiaries, independent traders and energy suppliers to third-party intermediaries (TPIs). Water retailers are offering very different pricing and service levels, and customers are advised not to take the first deal, but shop around. Pricing variance has been more than 200 percent, a much higher level than seen in energy markets. Ensure research is conducted on pricing, contracts, products and service before making a decision. A trusted advisor can play a vital role in this procurement ecosystem.
Ask water retailers for case studies to demonstrate track record, visit their team and offices, and familiarize yourself with charging structures and commission payments. There is rarely such thing as a “free lunch” and advisors claiming to work for no fee or be “paid by the supplier” are likely to warrant further scrutiny.
- Have clear goals in mind
When planning your water procurement strategy, look at market conditions, set goals and understand your requirements. For example, if you require a 60-day payment term, this will impact the price. Use of automatic meter reading (AMR) technology for billing as opposed to manual readings will also affect the delivered price. Ensure you establish the requirements and goals for a new contract before going to market to simplify the decision-making process at the end of the tender.
Water markets are not globally influenced and volatile like energy wholesale markets, but clear goals, accurate data and research will ensure companies can use water deregulation as an opportunity to optimize tariffs. Combining strategies across utilities can ensure a comprehensive, consistent approach to procurement.
“Water market changes allow businesses to develop a common buying strategy across all commodities – rationalizing suppliers, improving data integrity, harmonizing services and driving down costs. The objectives for each utility are the same, so why approach them differently?”
Download the infographic on integrated utility procurement to learn more.