The English water market has been deregulated. Brendan Flattery assesses the competitive advantage available for commercial tenants and landlords, who are now able to choose their water supplier.
On 1st April, the utilities landscape shifted for businesses across England, with the deregulation of water. The move represents a competitive advantage for commercial tenants and landlords who are savvy and take control of their water supply in a similar way to choosing an energy provider. The change offers the potential to significantly improve the bottom line and enhance the energy efficiency of buildings and estates. Professionals should actively engage with the process.
What do the changes mean?
The deregulation of English water means all commercial properties in England ( around 1.2m businesses with water meters) will have access to a choice of supplier for the first time and be able to either renegotiate their contract or switch from their incumbent. Recent research from Utilitywise suggests more than half (53%) of English businesses are likely to switch suppliers. It is certainly a welcome break for businesses, which have felt the increased burden from business rate rises and the uncertainly around a post-Brexit future.
This freedom to negotiate better deals, multi-utility bundles and a single supplier for multiple locations will result in economic, time and environmental efficiencies, enhancing the green credentials and viability of commercial real estate across the UK. We expect this to be a game-changer for the sector across offices, retail, leisure and hospitality portfolios.
England is following Scotland, which deregulated water in 2008 and has seen impressive savings to commercial property portfolios. A well-known high street retailer with more than 3,500 sites, 400 of which are in Scotland, switched to a new water supplier post-deregulation and has seen water savings of £145,000 per annum and more than £55,000 of savings from water efficiency. This trend is set to repeat itself across England, with entrants of the market such as Everflow demonstrating water savings of up to 14% are possible depending on the location of the customer.
Benefits for businesses
There are clear benefits of water deregulation for customers, including reduced water charges, improved service and consolidation of accounts – all of which will be particularly beneficial for multi-site, multi-region businesses. New entrants are likely to enter the market in the coming weeks that can offer good value packages and tailored deals to commercial tenants and landlords. Service providers and consultancies will also offer wide-ranging and money-saving utility audits.
Companies should not view these positive water changes in isolation but instead take a full view of the new utilities market and suppliers. Inspecting bills holistically will ensure the best rates are applied to commercial real estate portfolios. It is anticipated there will be new propositions and a range of aggressive acquisition and retention plays across the utilities sector in the next few weeks, many offering combined energy and water packages.
‘Bundling’ of utilities also gives companies greater clout in negotiating combined gas, electricity and water savings. We estimate companies will be able to save up to 14% on their water bill after deregulation and by adopting energy controls solutions across all utilities, huge savings of 25% or more can be made. Bundling also opens up greater opportunities for monitoring energy and water usage on one platform. Utilitywise, for example, offers a feature whereby companies can view all utilities usage on a phone or tablet on one smart platform. In this way, businesses can manage utilities’ usage directly, plus educate staff to do the same.
For instance, by using smart energy controls, a retail company achieved savings of 15% on store lighting alone in the first year, equivalent to more than 3,100 tonnes of carbon. A further 10% was saved through cutting energy usage and moving usage hours to off-peak periods, resulting in lower bills. This reduction of 10% amounted to a saving of £150k.
Yet awareness of these available savings is low. A recent independent survey conducted for Utilitywise by Edelman intelligence showed 70% of English businesses wanted a combined energy and water proposition but only 24% felt they were well informed and just 40% of businesses were aware of deregulation. This presents a sizeable barrier to companies making the most of the new operating environment.
Data collection and intelligence are transforming the way buildings are run, with energy cost savings and reduction in carbon emissions placed front and centre. By giving companies more control over how much water, gas and electricity their property uses, tracked against the previous week, month and year, companies can rank sites against each other and understand where inefficiencies are happening and why. Businesses can also track out-of-hours energy usage and measure it by square footage.
The deregulation of water has provided the last piece in the puzzle for a combined and efficient utilities solution for businesses and commercial properties. I would urge all companies, whether large or small, to realise the opportunities water deregulation brings and take more control over their utilities.
The phase of deregulation will allow companies to strike while the iron is hot. With incumbent suppliers looking to defend market share, new entrants will be adopting aggressive pricing models to establish themselves. This offers huge potential additional savings for business customers.
Brendan Flattery is Chief Executive of utilities consultancy Utilitywise.
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