Lessons from the UK on Water Efficiency Through Retail Competition for Water Services

Originally published on the Alliance for Water Efficiency Financing Sustainable Water Blog (2/6/2015)


If businesses could choose their water provider what would this mean for water efficiency? This question has been tested in the UK through development of retail competition for non-household water and sewerage providers in Scotland since 2008 and is soon to be extended to England in April 2017. In the five years to 2013 Business Stream in Scotland helped customers save 16 billion litres of water and more than 28,000 tonnes of CO2.



Retail competition
Through retail competition for water customers are free to change from their existing monopoly water company to another water supplier. The current arrangements are really about the “customer-facing” services including billing customers, handling payments, reading meters, and taking calls from customers about network related issues. It doesn’t include water resources management, water and sewerage treatment, or management of water or sewerage networks. These are referred to as upstream competition in the figure below and the implications for water efficiency will be the subject of a future blog.

Figure: Overview of value chain and difference between upstream and retail competition

Although only 5% of businesses have switched suppliers in Scotland, 45,000 customers (50%) renegotiated terms of their supply and received benefits such as water efficiency. This has been much more successful than the four customers who have been able to switch for their water supply in England, which is currently limited to those who consume over 5 megalitres of water per year. Scottish Water is publicly owned but now has a business supplier arm named Business Stream, which competes with a range of other private businesses. In England, water companies were privatised in 1989 with each having between 1.2 and 8.5 million customers.

Why and how does this lead to water efficiency?
Traditionally water companies have a limited relationship with their customers, focussing on billing only or repairs when something goes wrong. There have been limited water efficiency services supplied in terms of online audit checklists or audits for large/ key customer groups only. Retail competition has driven the need for service differentiation in Scotland and water efficiency has been a major element in this. Competition is supported by over two thirds of small and medium sized business in England with water efficiency seen as a key service.  

Billing and metering represent the first step to water savings in Scotland. By driving economic efficiencies in the billing process a range of discounts have been provided to customers. The implementation of smart metering technology and more sophisticated billing for large multi-site organisations is another benefit. This enables both the organisation and the retail supplier to identify trends and opportunities for water savings. One example was a company who previously received over 4,000 paper bills per year who could save £80-200k (~US$118-297k) per year in administration costs. Automated metering can also alert customers to high consumption or leaks.

Water audits and water efficiency measures are the second step to savings for business. Water efficiency measures range from tap aerators and water saving devices for toilet cisterns for organisations with low water use to larger scale measures such process changes or advanced leak detection. In 2014 Business Stream in Scotland report saving £43m (~US$64m), 20 billion litres of water and 34,000 tonnes of carbon dioxide emissions since 2008. The public sector in particular in Scotland is projected to save £36m (~US$53m) over four years.

Alternative water sources can be another benefit to large water users such as rainwater harvesting, wastewater reuse, or new groundwater supplies. An example in Scotland was a caravan park that reduced consumption by 20% through installing rainwater harvesting. Services on the wastewater side can also lead to improved environmental outcomes. For example, one company in Scotland worked with a salmon farm to implement a new biological treatment technology so their wastewater quality complied with environmental requirements. There may also be opportunities to provide services to manage stormwater through green infrastructure and reduce sewage charges with combined sewer systems.

Opportunities for England and implications for the US
Based on the experience in Scotland there is a good potential for water efficiency gains in the non-household retail competition sector in England when this begins in April 2017. A benefit of competition in Scotland has been the change in perception over the value of water services compared with energy services and carbon emission reduction. Better informing customers on the value of water can also help implement the hierarchy of water quality and prevent potable water being used on activities that don’t require this level of quality (e.g. toilet flushing). As competition is rolled out in England we will begin to see if the water efficiency benefits continue and how resilient this model is to floods, droughts and economic pressures. A broad range of regulatory, voluntary and economic policy tools are needed to address water efficiency and this case study may provide insight for future approaches in the US.

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