Working alongside MOSL and The Consumer Council for Water (CCWater), we keep a close eye on retailer and wholesaler performance in the business retail market.
We want to see a vibrant and competitive market that delivers good outcomes for customers, saving them money, water, and time. All market participants have a role in delivering this vision. Industry has tools and processes available to put in place incentives that will encourage trading parties to deliver their services in the best interests of customers.
We want to ensure that retailers can enter and exit the market without undue barriers or costs. We also consider whether wholesalers are playing their part in facilitating market operation for retailers and customers alike in an effective, efficient and non-discriminatory way. In May 2019 Ofwat’s Chief Executive wrote to wholesalers noting that we want to see improvements in their support for markets and intend to review progress in autumn 2019.
Putting the spotlight on wholesaler performance
In our 2018 state of the market report, Open for Business, we identified a number of market frictions which need to be addressed if the business retail market is to reach its full potential for customers. These frictions included poor aggregate wholesaler performance and interactions between wholesalers and retailers.
In November 2018 we published a Call for inputs (CFI), focused on strengthening wholesaler service and performance in the market. The CFI considered some of the potential drivers behind these frictions and shared our initial thinking as to how wholesaler performance could be improved.
We followed up this work in June 2019 by publishing our CFI: Outcomes Report, which reflected on evidence received from the CFI and set out our specific expectations on what more needs be done – by whom and by when – to resolve market frictions arising from wholesaler performance.
What more needs to be done
Some progress has been made since November 2018 against the areas of concern identified in our CFI. But our Outcomes Report identifies that:
- We think that the Market Performance Framework (MPF) should be improved to provide a more holistic assessment of trading party performance and ensure that the right financial and reputational incentives are in place to encourage wholesalers to improve levels of service. We are supportive of MOSL’s commitment in its Market Performance Operating Plan for 2019/20 to define and execute a multi-year roadmap for the development of the MPF. We also welcome the work of the Retailer Wholesaler Group (RWG) which is presently developing a method for measuring the quality of service that wholesalers provide to retailers.
- Wholesalers should review the service that they provide and look to improve the way they communicate with retailers. Wholesalers should also consider if their policies are appropriate for the business retail market and deliver good outcomes for customers.
- We will be monitoring the extent to which trading parties are following RWG market guidance. If trading parties see the benefit in making specific guidance mandatory, we would encourage them to do so through the code modification process. We are prepared to intervene if we see evidence that other trading parties are unnecessarily obstructing or delaying this process.
Our expectations going forward
The table below summarises key milestones by which we expect to see further progress being made in the market. We will closely monitor developments over the next few months and will review progress again in autumn 2019.
|Publication of more market performance data (OPS for 2019)||From July 2019 onwards|
|Adoption of RWG – Market Guidance||Ofwat will be monitoring uptake of guidance from August 2019 onwards|
|Development of a common measure of retailer satisfaction||All trading parties to agree to adopt a common measure by October 2019
Arrangements put in place for an agreed measure to be implemented, with the first results published, by beginning April 2020
|Proposal for the redistribution of charges levied for underperformance against MPF metrics||Submitted for Ofwat to consider by October 2019|
|A multi-year plan for MPF development||Finalised by December 2019|
Rachel Fletcher wrote to MOSL in December 2019 to confirm Ofwat’s support for their 2020-21 business plan.