Companies racking up unpaid water bills during the pandemic have pushed water retailers to the brink, according to industry suppliers.
The UK Water Retailer Council (UKWRC), which represents 18 suppliers, has commissioned an independent report which also warns that pricing is unfair to customers and that some businesses are paying higher bills than necessary.
Most market participants were in deficit before the pandemic, but an increase in non-payments during the lockdown has increased the pressure. There is now a “significant risk of systemic retailer failure,” said the report by consulting firm Economic Insight.
If a supplier collapses, there is a risk that “customers will be ‘stranded’ without a retailer for a period of time,” the report adds. The sector’s low margins also meant that water retailers were unable to invest in the service and deliver the improvements promised when the market opened up to liberalization, the sector said.
“This report makes it clear that the market is currently not providing adequate solutions for business customers,” said Phillip Mills, President of the UKWRC.
The industry warning comes four years after economic regulator Ofwat introduced reforms to allow non-residential customers, which include supermarkets, charities, public sector bodies and retailers, to transfer their terms billing to any water supplier in the country or to new independent entrants.
The study found that the actual cost of serving the smaller customers in the market – who consume less than 1400 liters per day – is more than 50% higher than what they are allowed to charge by Ofwat, and that these customers represent about 70%. of the entire market.
The study found that larger water customers such as pubs and restaurants are charged more so they can subsidize small businesses.
Water retailers are allowed to charge small customers £ 78 per year for services – in addition to the cost of water – but the report says the actual average cost is £ 121 per year, which covers the cost counting, planning of site visits, invoicing. and deal with the problems.
John Reynolds, managing director of Castle Water, which has taken over commercial clients from Thames Water, said the charges were “completely unfair” to many of the smaller clients.
He cited several examples of cross-subsidies in the sector. In one case, he said, a pub was paying £ 500 a year for retail services, while an architectural firm two doors down was paying £ 50 a year, although the cost service at both premises was around £ 120 per year.
In another example, a charity shop pays £ 16,000 a year – based on a price estimate – because it doesn’t have a meter, which is the responsibility of the owners. On the same street, a games room with a meter pays just £ 750 a year.
The industry is asking the regulator to present a review that would examine how the sector could be made more sustainable.
Ofwat said he had taken steps to protect business customers, especially in light of the pandemic, and would continue to work with Defra, the Department of the Environment, “to see if we can do more.”
“We are also looking at what additional protections are needed to help the market cope with the increase in customer bad debts resulting from Covid-19.”